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 biologicals of approximately $10 million. We estimate for this proposed rule that the amount of pass-through spending for the device categories and the drugs and biologicals that are continuing to receive pass-through payment in CY 2026 and the amount of pass-through spending for those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2026 would be approximately $587.0 million (approximately $571.8 million for device categories and approximately $15.2 million for drugs and biologicals), which represents only 0.59 percent of total projected OPPS payments for CY 2026 (approximately $100 billion). Therefore, we estimate that pass- through spending in CY 2026 will not exceed the 2.0 percent of total projected OPPS CY 2026 program spending limit provided for in section 1833(t)(6)(E) of the Act. VII. OPPS Payment for Hospital Outpatient Visits and Critical Care Services For CY 2026, we propose to continue our current clinic and emergency department (ED) hospital outpatient visits payment policies. For a description of these policies, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70298). We also propos department (ED) hospital outpatient visits payment policies. For a description of these policies, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70298). We also propose to continue our payment policy for critical care services for CY 2026. For a description of this policy, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70298), and for the history of this payment policy, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 75043). As we stated in the CY 2022 OPPS/ ASC final rule with comment period (86 FR 63663), the volume control method for clinic visits furnished by excepted off-campus provider-based departments (PBDs) applies for CY 2022 and subsequent years. More specifically, we finalized a policy to continue to utilize a PFS-equivalent payment rate for the hospital outpatient clinic visit service described by HCPCS code G0463 when it is furnished by these departments for CY 2022 and subsequent years. The PFS-equivalent rate for CY 2026 is 40 percent of the proposed OPPS payment. Under this policy, these departments will be paid approximately 40 percent VerDate Sep 2014 22:23 Jul 16, 202 ent years. The PFS-equivalent rate for CY 2026 is 40 percent of the proposed OPPS payment. Under this policy, these departments will be paid approximately 40 percent VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00182 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 33657 of the OPPS rate for the clinic visit service in CY 2026. For CY 2026, we propose to implement a volume control method for additional services furnished by excepted PBDs. For more information on this proposal, we refer readers to section X.A. of this proposed rule. In the CY 2023 OPPS/ASC final rule with comment period (87 FR 71748), we finalized a policy that excepted off- campus PBDs (departments that bill the modifier ‘‘PO’’ on claim lines) of rural Sole Community Hospitals (SCHs), as described under 42 CFR 412.92 and designated as rural for Medicare payment purposes, are exempt from the clinic visit payment policy that applies a PFS-equivalent payment rate for the clinic visit service, as described by HCPCS code G0463, when provided at an off-camp ayment purposes, are exempt from the clinic visit payment policy that applies a PFS-equivalent payment rate for the clinic visit service, as described by HCPCS code G0463, when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act. For the full discussion of this policy, we refer readers to the CY 2023 OPPS/ASC final rule with comment period (87 FR 72047 through 72051). For CY 2026, we propose to exempt excepted off-campus PBDs (departments that bill the modifier ‘‘PO’’ on claim lines) of rural SCHs, as described under 42 CFR 412.92 and designated- as rural for Medicare payment purposes, from any additional services subject to our volume control method payment policy. For more information on this proposal, we refer readers to section X.A. of this proposed rule. VIII. Payment for Partial Hospitalization and Intensive Outpatient Services This section discusses payment for partial hospitalization services as well as intensive outpatient services. Since CY 2000, Medicare has paid for partial hospitalization services under the OPPS. Beginning in CY 2024, as authorized by section 4124 of the Consolidated Appropriations Act (CAA), 2023 (Pub. L. 117–328), Medicare bega re has paid for partial hospitalization services under the OPPS. Beginning in CY 2024, as authorized by section 4124 of the Consolidated Appropriations Act (CAA), 2023 (Pub. L. 117–328), Medicare began paying for intensive outpatient services furnished by hospital outpatient departments, community mental health centers, federally qualified health centers, and rural health clinics in addition to opioid treatment programs. Additional background on the partial hospitalization and intensive outpatient benefits is included in the following paragraphs. A. Background 1. Partial Hospitalization A partial hospitalization program (PHP) is an intensive outpatient program of psychiatric services provided as an alternative to inpatient psychiatric care for individuals who have an acute mental illness, which includes, but is not limited to, conditions such as depression, schizophrenia, and substance use disorders (SUD). Section 1861(ff)(1) of the Act defines partial hospitalization services as the items and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursuant to an individualized, writt tems and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursuant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such program), which sets forth the physician’s diagnosis, the type, amount, frequency, and duration of the items and services provided under the plan, and the goals for treatment under the plan. Section 1861(ff)(2) of the Act describes the items and services included in partial hospitalization services. Section 1861(ff)(3)(A) of the Act specifies that a PHP is a program furnished by a hospital to its outpatients or by a community mental health center (CMHC), as a distinct and organized intensive ambulatory treatment service, offering less than 24-hour-daily care, in a location other than an individual’s home or inpatient or residential setting. Section 1861(ff)(3)(B) of the Act defines a CMHC for purposes of this benefit. We refer readers to sections 1833(t)(1)(B)(i), 1833(t)(2)(B), 1833(t)(2)(C), and 1833(t)(9)(A) of the Act and 42 CFR 419.21, for additio )(3)(B) of the Act defines a CMHC for purposes of this benefit. We refer readers to sections 1833(t)(1)(B)(i), 1833(t)(2)(B), 1833(t)(2)(C), and 1833(t)(9)(A) of the Act and 42 CFR 419.21, for additional information regarding PHP. PHP policies and payment have been addressed under OPPS since CY 2000. In CY 2008, we began efforts to strengthen the PHP benefit through extensive data analysis, along with policy and payment changes, by implementing two refinements to the methodology for computing the PHP median. For a detailed discussion on these policies, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). In CY 2009, we implemented several regulatory, policy, and payment changes. For a detailed discussion on these policies, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68697). In CY 2010, we retained the two-tier payment approach for partial hospitalization services and used only hospital-based PHP data in computing the PHP APC per diem costs, upon which PHP APC per diem payment rates are based (74 FR 60556 through 60559). In CY 2011 (75 FR 71994), we established four separate PHP APC per d PHP data in computing the PHP APC per diem costs, upon which PHP APC per diem payment rates are based (74 FR 60556 through 60559). In CY 2011 (75 FR 71994), we established four separate PHP APC per diem payment rates: two for CMHCs (APC 0172 and APC 0173) and two for hospital-based PHPs (APC 0175 and APC 0176). We also instituted a 2-year transition period for CMHCs to the CMHC APC per diem payment rates. For a detailed discussion, we refer readers to section X.B. of the CY 2011 OPPS/ ASC final rule with comment period (75 FR 71991 through 71994). In CY 2012, we determined the relative payment weights for partial hospitalization services provided by CMHCs based on data derived solely from CMHCs and the relative payment weights for partial hospitalization services provided by hospital-based PHPs based exclusively on hospital data (76 FR 74348 through 74352). In the CY 2013 OPPS/ASC final rule with comment period, we finalized our proposal to base the relative payment weights that underpin the OPPS APCs, including the four PHP APCs (APCs 0172, 0173, 0175, and 0176), on geometric mean costs rather than on the median costs. For a detailed discussion on this policy, we refer readers t rpin the OPPS APCs, including the four PHP APCs (APCs 0172, 0173, 0175, and 0176), on geometric mean costs rather than on the median costs. For a detailed discussion on this policy, we refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68406 through 68412). In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 and 43622) and CY 2015 OPPS/ASC final rule with comment period (79 FR 66902 through 66908), we continued to apply our established policies to calculate the four PHP APC per diem payment rates based on geometric mean per diem costs using the most recent claims data for each provider type. For a detailed discussion on this policy, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 75047 through 75050). In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70453 through 70467), we described our extensive analysis of the claims and cost data and ratesetting methodology, corrected a cost inversion that occurred in the final rule data with respect to hospital-based PHP providers, and renumbered the PHP APCs. In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79687 through 79691), we continued to apply our establis e data with respect to hospital-based PHP providers, and renumbered the PHP APCs. In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79687 through 79691), we continued to apply our established policies to calculate the PHP APC per diem payment rates based on geometric mean per diem costs and finalized a policy to combine the Level 1 and Level 2 PHP APCs for CMHCs and for hospital-based PHPs. We also implemented an eight-percent outlier cap for CMHCs to mitigate potential outlier billing vulnerabilities. For a comprehensive description of PHP payment policy, including a detailed methodology for determining PHP per VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00183 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 33658 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules diem amounts, we refer readers to the CY 2016 and CY 2017 OPPS/ASC final rules with comment period (80 FR 70453 through 70455 and 81 FR 79678 through 79680, respectively). In the CYs 2018 and 2019 OPPS/ASC final rules with comment period (82 FR 59373 through 59381 and 83 FR 58983 through 58998, iod (80 FR 70453 through 70455 and 81 FR 79678 through 79680, respectively). In the CYs 2018 and 2019 OPPS/ASC final rules with comment period (82 FR 59373 through 59381 and 83 FR 58983 through 58998, respectively), we continued to apply our established policies to calculate the PHP APC per diem payment rates based on geometric mean per diem costs, designated a portion of the estimated 1.0 percent hospital outpatient outlier threshold specifically for CMHCs, and proposed updates to the PHP allowable HCPCS codes. We finalized these proposals in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61352). In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61339 through 61350), we finalized a proposal to use the calculated CY 2020 CMHC geometric mean per diem cost and the calculated CY 2020 hospital-based PHP geometric mean per diem cost, but with a cost floor equal to the CY 2019 final geometric mean per diem costs as the basis for developing the CY 2020 PHP APC per diem rates. Also, we continued to designate a portion of the estimated 1.0 percent hospital outpatient outlier threshold specifically for CMHCs, consistent with the percentage of projected payments to CMH rates. Also, we continued to designate a portion of the estimated 1.0 percent hospital outpatient outlier threshold specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS, excluding outlier payments. In the April 30, 2020 interim final rule with comment (85 FR 27562 through 27566), effective as of March 1, 2020 and for the duration of the COVID– 19 Public Health Emergency (PHE), hospital and CMHC staff were permitted to furnish certain outpatient therapy, counseling, and educational services (including certain PHP services), incident to a physician’s services, to beneficiaries in temporary expansion locations, including the beneficiary’s home, as long as the location met all conditions of participation to the extent not waived. A hospital or CMHC could furnish such services using telecommunications technology to a beneficiary in a temporary expansion location if that beneficiary was registered as an outpatient. In the CY 2023 OPPS/ASC final rule with comment period (87 FR 72247), we confirmed that these provisions applied only for the duration of the COVID–19 PHE. On May 11, 2023, the COVID–19 PHE ended, and accordingly, these flexibil l rule with comment period (87 FR 72247), we confirmed that these provisions applied only for the duration of the COVID–19 PHE. On May 11, 2023, the COVID–19 PHE ended, and accordingly, these flexibilities ended as well. In the CY 2021 OPPS/ASC final rule with comment period (85 FR 86073 through 86080), we continued our current methodology to utilize cost floors, as needed. In the CY 2022 OPPS/ ASC final rule with comment period (86 FR 63665 and 63666), as a result of the COVID–19 PHE, we finalized our proposal to calculate the PHP per diem costs using the year of claims consistent with the calculations that would be used for other OPPS services, by using the CY 2019 claims and the cost reports that were used for CY 2021 final rulemaking to calculate the CY 2022 PHP per diem costs. In addition, for CY 2022 and subsequent years, we finalized our proposal to use cost and charge data from the Hospital Cost Report Information System (HCRIS) as the source for the CMHC cost-to-charge ratios (CCRs), instead of using the Outpatient Provider Specific File (OPSF) (86 FR 63666). In the CY 2023 OPPS/ASC final rule with comment period (87 FR 71995), we finalized our proposal to use the latest a (CCRs), instead of using the Outpatient Provider Specific File (OPSF) (86 FR 63666). In the CY 2023 OPPS/ASC final rule with comment period (87 FR 71995), we finalized our proposal to use the latest available CY 2021 claims but use the cost information from prior to the COVID–19 PHE for calculating the CY 2023 CMHC and hospital-based PHP APC per diem costs. The application of the OPPS standard methodology, including the effect of budget neutralizing all other OPPS policy changes unique to CY 2023, resulted in the final calculated CMHC PHP APC payment rate being unexpectedly lower than the CY 2022 final CMHC PHP APC rate. Therefore, we finalized utilizing the equitable adjustment authority of section 1833(t)(2)(E) of the Act to appropriately pay for CMHC PHP services at the same payment rate as for CY 2022, that is, $142.70. In addition, we clarified the payment under the OPPS for new HCPCS codes that designate non-PHP services provided for the purposes of diagnosis, evaluation, or treatment of a mental health disorder and are furnished to beneficiaries in their homes by clinical staff of the hospital that would not be recognized as PHP services; however, none of the PHP regulations tment of a mental health disorder and are furnished to beneficiaries in their homes by clinical staff of the hospital that would not be recognized as PHP services; however, none of the PHP regulations would preclude a patient that is under a PHP plan of care from receiving other reasonable and medically necessary non-PHP services from a hospital (87 FR 72001 and 72002). In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81811), we revised the regulation at § 424.24(e)(1)(i) to require the physician certification for PHP services to include a certification that the patient requires such services for a minimum of 20 hours per week, as required by section 1861(ff)(1) of the Act, as amended by section 4124(a) of Division FF of the CAA, 2023. In addition, we modified the regulations for PHP at § 410.43 to include references to SUD. In the same CY 2024 OPPS/ASC final rule with comment period, we also established separate payment rates for PHP days with 3 services and days with 4 or more services. Accordingly, we established four separate PHP APC per diem payment rates: one for CMHCs for 3-service days and another for CMHCs for 4-service days (APC 5853 and APC 5854, respectivel r more services. Accordingly, we established four separate PHP APC per diem payment rates: one for CMHCs for 3-service days and another for CMHCs for 4-service days (APC 5853 and APC 5854, respectively), and one for hospital-based PHPs for 3-service days and another for hospital—based PHPs for 4-service days (APC 5863 and APC 5864, respectively). We also finalized a policy to utilize the separate CMHC rates for 3-service and 4-service PHP days as the Medicare Physician Fee Schedule (MPFS) rates, depending upon whether a nonexcepted- off-campus hospital outpatient department furnishes 3 or 4 PHP services in a day. Lastly, we finalized several changes beginning in CY 2024 to align coding, billing, and payment between PHPs and intensive outpatient programs. In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94266 through 94268), we maintained the coding and billing policies for PHP as established in the CY 2024 OPPS/ASC final rule with comment period. 2. Intensive Outpatient Program Services Section 4124(b) of the CAA, 2023 established Medicare coverage for intensive outpatient services effective for items and services furnished on or after January 1, 2024. An intensive out ogram Services Section 4124(b) of the CAA, 2023 established Medicare coverage for intensive outpatient services effective for items and services furnished on or after January 1, 2024. An intensive outpatient program (IOP) is a distinct and organized program of psychiatric services for individuals who have an acute mental illness, which includes, but is not limited to, conditions such as depression, schizophrenia, and SUD. Intensive outpatient services are not required to be provided in lieu of inpatient hospitalization. Section 1861(ff)(4) of the Act defines intensive outpatient services as the items and services described in paragraph (2) prescribed by a physician for an individual determined (not less frequently than every other month) by a physician to have a need for such services for a minimum of 9 hours per week and provided under a program described in paragraph (3) under the supervision of a physician pursuant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such program), which plan sets forth the physician’s diagnosis, the type, amount, frequency, and duration of t odically reviewed by a physician (in consultation with appropriate staff participating in such program), which plan sets forth the physician’s diagnosis, the type, amount, frequency, and duration of the items and services provided under the plan, and the goals for treatment under the plan. Section 1861(ff)(2) of the Act describes the items and services included in intensive VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00184 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 33659 outpatient services. Section 1861(ff)(4)(C) of the Act specifies that an IOP is a program furnished by a hospital to its outpatients, by a CMHC, by a Federally qualified health center (FQHC), or by a rural health clinic (RHC) as a distinct and organized intensive ambulatory treatment service, offering less than 24-hour-daily care, in a location other than an individual’s home or inpatient or residential setting. Section 1861(ff)(3)(B) of the Act defines a CMHC for purposes of this benefit. We refer readers to sections 1833(t)(1)(B)(i), 1833(t)( er than an individual’s home or inpatient or residential setting. Section 1861(ff)(3)(B) of the Act defines a CMHC for purposes of this benefit. We refer readers to sections 1833(t)(1)(B)(i), 1833(t)(2)(B), 1833(t)(2)(C), and 1833(t)(9)(A) of the Act and 42 CFR 419.21, for additional information regarding IOP. In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81812 through 81857), we established payment and program requirements for the IOP benefit furnished by a hospital to its outpatients, or by a CMHC, an FQHC, or an RHC. In addition, we established Medicare Part B coverage for IOP services provided by Opioid Treatment Programs (OTPs) for the treatment of opioid use disorder (OUD). Consistent with the statutory definition of intensive outpatient services under section 1861(ff)(2) of the Act, we finalized regulations at 42 CFR 410.44 to set forth the conditions and exclusions applicable for intensive outpatient services, and at § 424.24 to set forth the content of the certification and plan of treatment requirements for intensive outpatient services. We also revised certain existing regulations at §§ 410.2, 410.3, 410.10, 410.27, 410.150, and 419.21 to add a regulatory ification and plan of treatment requirements for intensive outpatient services. We also revised certain existing regulations at §§ 410.2, 410.3, 410.10, 410.27, 410.150, and 419.21 to add a regulatory definition of intensive outpatient services and to include intensive outpatient services in the regulations for medical and other health services paid for under Medicare Part B, and in the case of § 419.21, under the OPPS. Additionally, we created regulations at § 410.111 to establish the requirements for coverage of IOP services furnished in CMHCs, and at § 410.173 to establish conditions of payment for IOP services furnished in CMHCs. Lastly, we revised § 410.155 to exclude IOP services from the outpatient mental health treatment limitation, consistent with the statutory requirement of section 1833(c)(2) of the Act, as amended by section 4124(b)(3) of the CAA, 2023. In addition, as discussed in greater detail in the following sections, we established coding, billing, and payment policies for IOP that align with the policies established for PHP provided in the same settings. Specifically, we established four separate IOP APC per diem payment rates at the same rates we proposed for th s for IOP that align with the policies established for PHP provided in the same settings. Specifically, we established four separate IOP APC per diem payment rates at the same rates we proposed for the PHP APCs: one for CMHCs for 3-service days and another for CMHCs for 4-service days (APC 5851 and APC 5852, respectively), and one for hospital-based IOPs for 3-service days and another for hospital-based IOPs for 4-service days (APC 5861 and APC 5862, respectively). Similar to the policy finalized for PHP, we finalized a policy to utilize the CMHC rates for 3- service and 4-service IOP days as the MPFS rates, depending upon whether a nonexcepted hospital outpatient department furnishes 3 or 4 IOP services in a day. For IOP services provided by an RHC or FQHC, we established a 3-service per day payment rate based on the same rate as APC 5861, which is the 3-service hospital-based IOP rate (§ 405.2462(j)). In the CY 2025 PFS final rule, we established a 4 or more services per day payment rate for an IOP provided by an RHC or FQHC based on the same rate as APC 5862, which is the 4 or more services hospital-based IOP rate (89 FR 98017 and 98018). Information regarding payment policies f rate for an IOP provided by an RHC or FQHC based on the same rate as APC 5862, which is the 4 or more services hospital-based IOP rate (89 FR 98017 and 98018). Information regarding payment policies for IOP services furnished by FQHCs and RHCs, including information regarding proposed CY 2026 policies for those settings, can be found in the MPFS proposed rule, which is published elsewhere in the Federal Register. Furthermore, in the CY 2024 OPPS/ ASC final rule, we established a payment adjustment for IOPs provided by an OTP based on three times the payment rate for APC 5861 beginning in CY 2024 (§ 410.67(d)(4)(i)(F)). We finalized regulations at § 410.67(d)(4)(ii) to add that the payment amount for OTP intensive outpatient services will be geographically adjusted using the Geographic Adjustment Factor (GAF) described in § 414.26. Lastly, we amended § 410.67(d)(4)(iii) to add that payment for OTP intensive outpatient services is updated annually using the Medicare Economic Index described in § 405.504(d). Payment rates for IOP provided in the OTP setting are updated as part of the OTP fee schedule and are not addressed in this CY 2026 OPPS/ ASC proposed rule. Lastly, in the CY 2025 bed in § 405.504(d). Payment rates for IOP provided in the OTP setting are updated as part of the OTP fee schedule and are not addressed in this CY 2026 OPPS/ ASC proposed rule. Lastly, in the CY 2025 OPPS/ASC final rule with comment period (89 FR 94266 through 94268), we maintained the coding and billing policies for IOP as established in the CY 2024 OPPS/ ASC final rule with comment period. B. Coding and Billing for PHP and IOP Services Under the OPPS In the CY 2024 OPPS/ASC final rule with comment period, we finalized a billing requirement that all providers use condition code 41 to indicate that a claim is for partial hospitalization services and use condition code 92 to identify intensive outpatient claims, effective January 1, 2024. Since the statutory definitions of both IOP and PHP generally include the same types of items and services covered, we stated in the CY 2024 OPPS/ASC final rule with comment period that we believe it is appropriate to align the programs using a consistent list of services, so that level of intensity would be the only differentiating factor between partial hospitalization services and intensive outpatient services. The use of condition codes 41 for tent list of services, so that level of intensity would be the only differentiating factor between partial hospitalization services and intensive outpatient services. The use of condition codes 41 for PHP claims and 92 for IOP claims allows us to differentiate between these services for billing purposes. We recognize that the level of intensity of mental health services that a patient requires may vary over time; therefore, we believe utilizing a consolidated list of HCPCS codes to identify services under both the IOP and PHP benefits supports a smooth transition for patients when a change in the intensity of their services is necessary to best meet their needs. For example, a patient receiving IOP services may experience an acute mental health need that necessitates more intense services through a PHP. Alternatively, an IOP patient that no longer requires the level of intensity provided by the IOP can access less intense mental health services, such as individual mental health services. The full list of HCPCs codes recognized under the PHP and IOP benefits can be found in the Medicare Claims Processing internet Only Manual, Chapter 4, sections 260.1 and 261.1, respectively, and th s. The full list of HCPCs codes recognized under the PHP and IOP benefits can be found in the Medicare Claims Processing internet Only Manual, Chapter 4, sections 260.1 and 261.1, respectively, and their subsections, available at https://www.cms.gov/ regulations-and-guidance/guidance/ manuals/downloads/clm104c04.pdf. To qualify for payment for the IOP APC (5851, 5852, 5861, or 5862) or the PHP APC (5853, 5854, 5863, or 5864), one service provided that day must be from the Partial Hospitalization and Intensive Outpatient Primary list. We refer readers to the CY 2024 OPPS final rule with comment period for further discussion regarding our expectation that at least one of the services on the PHP and IOP Primary list will be indicated per day for patients who need the level of care offered by a PHP or IOP program. The PHP and IOP Primary List can be found in the CY 2024 OPPS/ASC final rule with comment period at 88 FR 81821. Beginning in CY 2024, we recognized caregiver training services and Principal Illness Navigation (PIN) services as PHP and IOP services. We explained that the reported costs associated with providing such services are included when we calculate the PHP and IOP paym nd Principal Illness Navigation (PIN) services as PHP and IOP services. We explained that the reported costs associated with providing such services are included when we calculate the PHP and IOP payment VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00185 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 33660 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules rates; however, these services do not count toward the determination of whether a PHP or IOP day is paid at the 3-service or 4-service rate. We refer readers to the CY 2024 OPPS/ASC final rule with comment period for a detailed discussion of this policy (88 FR 81823 through 81825). As finalized in the CY 2024 OPPS/ ASC final rule with comment period (88 FR 81821 and 81822), if new codes are established that represent the PHP and IOP services described under §§ 410.43(a)(4) and 410.44(a)(4), respectively, such codes are added to the list of codes recognized for payment for PHP or IOP through sub-regulatory guidance. We note that coding updates frequently occur outside of the standard rulemaking timeline. We adopted e added to the list of codes recognized for payment for PHP or IOP through sub-regulatory guidance. We note that coding updates frequently occur outside of the standard rulemaking timeline. We adopted this sub-regulatory process in order to pay expeditiously when new codes are created that describe any of the services enumerated at §§ 410.43(a)(4) and 410.44(a)(4), which PHPs and IOPs, respectively, would provide. We explained that this policy applies to new codes that are cross walked to a previously included code, or whose code descriptor is substantially similar to a descriptor for a code on the list or describes a service on the list. We stated that any additional services not described at § 410.43(a)(4) or § 410.44(a)(4) would be added to the lists in regulation through notice and comment rulemaking. In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94266 through 94268), we did not add any new services not described at § 410.43(a)(4) or § 410.44(a)(4) to the list of PHP and IOP services. C. Proposed CY 2026 Payment Rates for PHP and IOP We propose for CY 2026 to maintain the current payment rate methodology that we use for calculating PHP and IOP payment rates for P and IOP services. C. Proposed CY 2026 Payment Rates for PHP and IOP We propose for CY 2026 to maintain the current payment rate methodology that we use for calculating PHP and IOP payment rates for hospital-based providers. For CMHCs, we propose to revise our methodology for calculating PHP and IOP payment rates. Specifically, we propose to apply the 40 percent MPFS Relativity Adjuster to calculate PHP and IOP payment rates for CMHCs. Under this proposed methodology, we would multiply the CY 2026 rates for the hospital-based PHP and IOP APCs by 0.4 to calculate the payment rates for the CMHC PHP and IOP APCs. 1. Background on the Current Payment Rate Methodology for PHP and IOP Beginning in CY 2024, we established four separate PHP APC per diem payment rates: one for CMHCs for 3- service days and another for CMHCs for 4-service days (APC 5853 and APC 5854, respectively), and one for hospital-based PHPs for 3-service days and another for hospital-based PHPs for 4-service days (APC 5863 and APC 5864, respectively). In addition, for hospital-based PHPs, we finalized a policy to calculate payment rates using the broader OPPS data set, instead of using hospital-based PHP data only. We 3 and APC 5864, respectively). In addition, for hospital-based PHPs, we finalized a policy to calculate payment rates using the broader OPPS data set, instead of using hospital-based PHP data only. We explained that using the broader OPPS data set allows CMS to capture data from claims not identified as PHP, but that also include the service codes and intensity required for a PHP day. Because we established consistent coding and payment between the PHP and IOP benefits, we considered all OPPS data for PHP days and non-PHP days that include 3 or more of the same service codes. We established four separate IOP APC per diem payment rates at the same rates we proposed for the PHP APCs: one for CMHCs for 3- service days and another for CMHCs for 4-service days (APC 5851 and APC 5852, respectively), and one for hospital-based IOPs for 3-service days and another for hospital-based IOPs for 4-service days (APC 5861 and APC 5862, respectively). In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81829 and 81830), we noted that the standard PHP day is typically four services or more per day. We explained that we have historically provided payment for three services a day for extenu riod (88 FR 81829 and 81830), we noted that the standard PHP day is typically four services or more per day. We explained that we have historically provided payment for three services a day for extenuating circumstances when a beneficiary would be unable to complete a full day of PHP treatment. As we stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66672), it was never our intention that days with only three units of service should represent the number of services provided in a typical PHP day. Our intention was to cover days that consisted of three units of service only in certain limited circumstances. For example, as we noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41513), we believe 3-service days may be appropriate when a patient is transitioning towards discharge (or days when a patient is at the beginning of his or her PHP stay). Another example of when it may be appropriate for a program to provide only three units of service in a day is when a patient is required to leave the PHP early for the day due to an unexpected medical appointment. In the same CY 2024 OPPS/ASC final rule with comment period, we also explained that prior to CY 2024, we histor is required to leave the PHP early for the day due to an unexpected medical appointment. In the same CY 2024 OPPS/ASC final rule with comment period, we also explained that prior to CY 2024, we historically prepared the data by first applying PHP-specific trims and data exclusions and assessing CCRs. We direct the reader to the CY 2016 OPPS/ ASC final rule with comment period (80 FR 70463 through 70465) for a more complete discussion of these trims, data exclusions, and CCR adjustments. In prior rules, we typically included a discussion of PHP-specific data trims, exclusions, and CCR adjustments; we did not include that discussion in the CY 2024 OPPS/ASC proposed rule or final rule with comment period. We stated that these PHP-specific data trims and exclusions addressed limitations as well as anomalies in the PHP data. However, as noted earlier, we finalized a methodology for CY 2024 to calculate hospital-based PHP payment rates for 3 services per day and 4 services per day based on cost per day using the broader OPPS data set. Accordingly, we did not apply PHP-specific trims and data exclusions, but rather we applied the same trims and data exclusions consistent with the OPPS. We ost per day using the broader OPPS data set. Accordingly, we did not apply PHP-specific trims and data exclusions, but rather we applied the same trims and data exclusions consistent with the OPPS. We stated in the CY 2024 OPPS/ASC final rule with comment period (88 FR 81830) that while no IOP benefit existed prior to the CAA, 2023, the types of items and services included in IOP had been, and were, paid for by Medicare either as part of the PHP benefit or under the OPPS more generally. Additionally, we stated that prior to the CAA, 2023, CMS had begun gathering information from interested parties on IOP under Medicare. In the CY 2023 OPPS/ASC proposed rule (87 FR 44679), we issued a comment solicitation on intensive outpatient mental health treatment, including SUD treatment furnished by IOPs, to collect information regarding whether there are any gaps in coding that may be limiting access to needed levels of care for treatment of mental health disorders or SUDs for Medicare beneficiaries, and specific information about IOP services, such as the settings of care in which these programs typically furnish services, the range of services typically offered, and the range of practition ries, and specific information about IOP services, such as the settings of care in which these programs typically furnish services, the range of services typically offered, and the range of practitioner types that typically furnish these services. In addition, in the same CY 2024 OPPS/ASC final rule with comment period, we explained that along with the requirements for IOP mandated by the CAA, 2023, we took into consideration information we received from the comment solicitation to construct an appropriate data set to develop proposed rates for IOP. Since IOPs furnish the same types of services as PHP, just at a lower intensity, we stated that we believe it was appropriate to use the same data and methodology for calculating payment rates for both PHP and IOP for CY 2024. We explained that although PHP claims can be specifically identified, there was no specific VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00186 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 33661 identifier or billing code to indicate IOP services 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 33661 identifier or billing code to indicate IOP services that may have been provided before CY 2024. However, we noted that hospitals have been permitted to furnish and bill for many of these services as outpatient services under the OPPS. Thus, we analyzed a broader set of data that included both PHP and non-PHP days with 3 or more services in order to calculate proposed payment for PHP services. In order to establish consistent payment between PHP and IOP, we set IOP payment rates at the same rates as PHP. We stated that the primary goal in developing the payment rate methodology for IOP and PHP services was to pay providers an appropriate amount relative to the patients’ needs, and to avoid cost inversion in future years. We stated that setting the IOP payment rates equal to the PHP payment rates was appropriate because IOP was a newly established benefit, and we did not have definitive data on utilization. However, we explained that both programs utilize the same services, but furnish them at different levels of intensity, with different ished benefit, and we did not have definitive data on utilization. However, we explained that both programs utilize the same services, but furnish them at different levels of intensity, with different numbers of services furnished per day and per week, depending on the program. Therefore, we stated that we expect it would be appropriate to pay the same per diem rates for IOP and PHP services unless future data analysis supports calculating rates independently. In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81833) we established a policy of applying the 4- service day payment rate (that is, payment for PHP APCs 5854 for CMHCs and 5864 for hospitals, and IOP APCs 5852 for CMHCs and 5862 for hospitals) for days with 4 or more services. For days with three or fewer services, we apply the 3-service day payment rate (that is, payment for PHP APCs 5853 for CMHCs and 5863 for hospitals, and IOP APCs 5851 for CMHCs and 5861 for hospitals). As we noted in the CY 2024 OPPS/ASC final rule with comment period, we expect days with fewer than three services would be very infrequent, and we intend to monitor the provision of these days among providers and individual patients. In the l rule with comment period, we expect days with fewer than three services would be very infrequent, and we intend to monitor the provision of these days among providers and individual patients. In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94269), for beneficiaries in a PHP or IOP, we maintained the payment rate methodology finalized in the CY 2024 OPPS/ASC final rule with comment period. 2. Analysis of PHP and IOP Costs Under the Current Methodology Following the current structure, the calculated CY 2026 geometric mean per diem cost for hospital-based PHP and IOP providers that provide 3 services per day is $340.90, which we propose to use for calculating the payment rate for the 3-service day hospital-based PHP APC 5863 and the 3-service day hospital-based IOP APC 5861, as discussed in the following section. The calculated CY 2026 geometric mean per diem cost for hospital-based PHP and IOP providers that provide 4 services per day is $424.60, which we propose to use for calculating the payment rate for the 4-service day hospital-based PHP APC 5864 and the 4-service day hospital-based IOP APC 5862, as discussed in the following section. The calculated CY 2026 geome or calculating the payment rate for the 4-service day hospital-based PHP APC 5864 and the 4-service day hospital-based IOP APC 5862, as discussed in the following section. The calculated CY 2026 geometric mean per diem cost for CMHC PHP and IOP providers resulted in an inversion, with the CMHC 3-service geometric mean per diem costs equaling $191.83 and the CMHC 4-service geometric mean per diem costs equaling $110.39. We believe the inverted geometric mean per diem costs are influenced by the small number of CMHCs that bill Medicare for PHP and IOP services, as well as CMHCs with low costs that first began billing Medicare for services in CY 2024. Table 67 summarizes the PHP and IOP geomean costs calculated using the current methodology. 3. Proposed CY 2026 Payment Rate Methodology for PHP and IOP For CY 2026, we propose to maintain our current methodology of calculating separate rates for hospitals and CMHCs. For the four hospital-based PHP and IOP APCs (that is, APCs 5861, 5862, 5863, and 5864), we propose using the latest available cost information, from cost reports beginning three fiscal years prior to the year that is the subject of the rulemaking, and CY 2024 OPPS claims to 3, and 5864), we propose using the latest available cost information, from cost reports beginning three fiscal years prior to the year that is the subject of the rulemaking, and CY 2024 OPPS claims to update the payment rates. This proposal is consistent with the overall proposed use of cost data for the OPPS, which is discussed in section II.A.1.a. of this proposed rule. In accordance with the methodology finalized in the CY 2024 OPPS/ASC final rule with comment period, we propose to base the payment rate for each hospital-based PHP APC on the geometric mean per diem cost for days with three services and four or more services. We propose to use the broader set of OPPS data to calculate the geometric mean costs for hospital outpatient departments, and we propose to apply the same trims and exclusions consistent with the OPPS. We also propose to set the payment rates for the hospital-based IOP APCs based on the geometric mean per diem cost for PHP VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00187 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 000 265001 PO 00000 Frm 00187 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 00188 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 33663 pay providers an appropriate amount relative to the patients’ needs. If we applied the 40 percent MPFS Relativity Adjuster to the hospital-based PHP and IOP geometric mean per diem costs, it would result in proposed CY 2026 CMHC costs of $136.36 for a 3- service day and $169.84 for a 4-service day. These proposed CY 2026 CMHC costs are generally in line with the CY 2025 CMHC costs, which were $112.59 for a 3-service day and $170.37 for a 4- service day. Additionally, we observed on average, the CY 2024 and CY 2025 geometric mean costs for the CMHC PHP and IOP APCs were 40 percent of the CY 2024 and CY 2025 geometric mean costs for the hospital-based PHP and IOP APCs. Therefore, we believe that applying the 40 percent Relativity Adjuster to hospital-based PHP and IOP cos ercent of the CY 2024 and CY 2025 geometric mean costs for the hospital-based PHP and IOP APCs. Therefore, we believe that applying the 40 percent Relativity Adjuster to hospital-based PHP and IOP costs would better approximate CMHC cost structures than the latest available CMHC cost data would. As we previously noted, the latest available CMHC cost data is influenced by the small number of CMHCs that bill Medicare for PHP and IOP services, as well as by CMHCs with low costs that first began billing Medicare for services in CY 2024. Therefore, for the reasons discussed in the prior paragraphs, we propose to apply the 40 percent MPFS Relativity Adjuster to the hospital-based PHP and IOP costs for the purposes of calculating the proposed geometric mean per diem costs for the CMHC PHP and IOP APCs for CY 2026 and subsequent years. Given the requirements of section 1833(t)(9)(A) of the Act, we believe it would be appropriate to revise our methodology for setting the relative payment weights for the OPPS rates for PHP and IOP services furnished by CMHCs based on new cost data and other relevant information and factors. Specifically, we propose to base this calculation on hospital cost d s for the OPPS rates for PHP and IOP services furnished by CMHCs based on new cost data and other relevant information and factors. Specifically, we propose to base this calculation on hospital cost data and the observed relationship between PHP and IOP costs in the hospital and CMHC settings, which as we noted earlier has been approximately 40 percent in recent years. We intend to monitor the provision of services in both PHP and IOP programs to better understand utilization patterns, and would reevaluate our payment rate methodology, if necessary. We note that if more recent data becomes available for the CY 2026 OPPS/ASC final rule that mitigates the cost inversion for CMHC geometric mean per diem costs, we may consider using such data as a basis for finalizing a payment rate methodology based on CMHC costs, rather than based on hospital costs adjusted by the 40 percent MPFS Relativity Adjuster. We solicit comments on our current and proposed payment rate methodologies for PHP and IOP services furnished by CMHCs. We are also soliciting comments on potential methodological changes or changes to data that could avoid or mitigate future cost inversions and instability for CMHC paym OP services furnished by CMHCs. We are also soliciting comments on potential methodological changes or changes to data that could avoid or mitigate future cost inversions and instability for CMHC payment rates. Table 68 shows the proposed calculated geometric mean per diem costs for hospital-based PHP and IOP APCs, and the proposed geometric mean per diem costs for CMHC PHP and IOP APCs based on our proposal to apply the 40 percent MPFS Relativity Adjuster for this CY 2026 OPPS/ASC proposed rule. Additional information about the data trims, data exclusions, and CCR adjustments applicable to the data used for this proposed rule can be found online at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalOutpatientPPS/index.html.97 D. Outlier Policy for CMHCs For CY 2026, we propose to maintain the calculations of the CMHC outlier percentage, cutoff point and percentage payment amount, outlier reconciliation, outlier payment cap, and fixed dollar threshold according to previously established policies to include PHP and IOP services. We refer readers to the CY 2024 OPPS/ASC final rule with comment period (88 FR 81834 through 81836) for more details on CMHC outlier po previously established policies to include PHP and IOP services. We refer readers to the CY 2024 OPPS/ASC final rule with comment period (88 FR 81834 through 81836) for more details on CMHC outlier policies, and to section II.G.1. of this proposed rule for our general policies for hospital outpatient outlier payments. 1. Background As discussed in the CY 2004 OPPS final rule with comment period (68 FR 63469 and 63470), we created a separate outlier policy specific to the estimated costs and OPPS payments provided to CMHCs. We designated a portion of the estimated OPPS outlier threshold 97 Click on the link labeled ‘‘CY 2026 OPPS/ASC Notice of Proposed Rulemaking’’, which can be found under the heading ‘‘Hospital Outpatient Prospective Payment System Rulemaking’’ and open the claims accounting document link at the bottom of the page, which is labeled ‘‘2026 NPRM OPPS Claims Accounting (PDF)’’. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00189 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 00190 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17J 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 00190 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 33665 IX. Services That Will Be Paid Only as Inpatient Services A. Background The Inpatient Only (IPO) list was established in rulemaking as part of the initial implementation of the Outpatient Prospective Payment System (OPPS) in 2000, pursuant to the Secretary’s authority under section 1833(t)(1)(B)(I) of the Act (65 FR 18455). The IPO list was created to identify services for which Medicare will make payment only when furnished in the inpatient hospital setting because of the invasive nature of the procedures, the underlying physical condition of the Medicare patient, or the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged (70 FR 68695). The creation of the IPO list was based on the premise (rooted in the practice of medicine at that time) that Medicare should e or monitoring before the patient can be safely discharged (70 FR 68695). The creation of the IPO list was based on the premise (rooted in the practice of medicine at that time) that Medicare should not pay for procedures furnished as outpatient services which are performed on an inpatient basis virtually all of the time for the Medicare population because performing these procedures on an outpatient basis would not be safe or appropriate, and therefore not reasonable and necessary under Medicare rules (86 FR 63671; 63 FR 47571). Designation of a service as inpatient only does not preclude the service from being furnished in a hospital outpatient setting but means that Medicare will not make payment for the service if it is furnished to a Medicare beneficiary in the hospital outpatient setting (65 FR 18443). Conversely, the absence of a procedure from the list should not be interpreted as identifying that procedure as appropriately performed only in the hospital outpatient setting (70 FR 68696). Rather, from the beginning, we have emphasized our expectation that, in every case, the physician or surgeon and hospital will exercise their professional judgment and assess the risk of t FR 68696). Rather, from the beginning, we have emphasized our expectation that, in every case, the physician or surgeon and hospital will exercise their professional judgment and assess the risk of the procedure or service to the individual patient, taking into account the site of service and act in that patient’s best interest (65 FR 18456). We have also previously stated that for procedures that are not included on the inpatient list, we rely on the practitioner’s judgment to determine on a patient-by-patient basis whether or not a particular procedure would be most appropriately performed in the inpatient setting (70 FR 68698). The IPO list policy has elicited both opposition and support in public comments since its establishment in CY 2000. In 2000, some commenters stated that they believed that CMS (then, the Health Care Financing Administration) was making decisions, such as the site of service for a particular medical procedure, that should be left to the discretion of surgeons and their patients (65 FR 18455). In 2011, certain comments suggested that regulations should not supersede the physician’s level of knowledge and assessment of the patient’s condition, and that the and their patients (65 FR 18455). In 2011, certain comments suggested that regulations should not supersede the physician’s level of knowledge and assessment of the patient’s condition, and that the physician can appropriately determine whether a procedure can be performed in a hospital outpatient setting, and many commenters suggested that the inpatient only list be eliminated in its entirety (76 FR 74354). Again in 2013, some commenters requested that the IPO list be eliminated in its entirety (78 FR 75055). From the beginning, several interested parties have also stated that the exclusion of services from payment under the OPPS is unnecessary and could have an adverse effect on advances in surgical care (65 FR 18442). Others have noted that the existence of the IPO list suggests that services that are not on the list or have been removed from the list should be/must be provided in the outpatient setting, regardless of the clinical judgment of the physician or the needs of the patient (85 FR 86084). Other commenters have defended the need for the list, stating that the IPO list serves as an important programmatic safeguard and maintains a common standard in the Medicare program nt (85 FR 86084). Other commenters have defended the need for the list, stating that the IPO list serves as an important programmatic safeguard and maintains a common standard in the Medicare program (85 FR 86086). In the CY 2021 OPPS/ASC final rule with comment period, published in the Federal Register on December 29, 2020 (85 FR 86084 through 86088), we finalized a policy to eliminate the IPO list over the course of 3 years (85 FR 86093). We revised our regulation at 42 CFR 419.22(n) to state that, effective January 1, 2021, the Secretary shall eliminate the list of services and procedures designated as requiring inpatient care through a 3-year transition. As part of the first phase of this elimination of the IPO list, we removed 298 codes, including 266 musculoskeletal-related services, from the list beginning in CY 2021. In the 2022 OPPS/ASC final rule with comment period, published on November 16, 2021, we halted the elimination of the IPO list and, after clinical review of the services removed from the IPO list in CY 2021 as part of the first phase of eliminating the IPO list, we returned most services removed from the IPO list in 2021 back to the IPO list beginning in CY 202 rvices removed from the IPO list in CY 2021 as part of the first phase of eliminating the IPO list, we returned most services removed from the IPO list in 2021 back to the IPO list beginning in CY 2022 (86 FR 63671 through 63736). We amended the regulation at § 419.22(n) to remove the reference to the elimination of the list of services and procedures designated as requiring inpatient care through a 3-year transition. We also finalized our proposal to codify the five longstanding criteria for determining whether a service or procedure should be removed from the IPO list in the regulation at § 419.23 (86 FR 63678). For CY 2023 through CY 2025, we maintained the IPO list and continued to evaluate services brought forth by interested parties for removal using the five longstanding criteria (87 FR 72004 through 72012; 88 FR 81858 through 81863; and 89 FR 94271 through 92475). B. Current Methodology for Identifying Appropriate Changes to the IPO List Currently, there are approximately 1,731 services on the IPO list. Under our longstanding policy and current regulations, we annually review the IPO list to identify any services that should be removed from, or added to, the list, based on services on the IPO list. Under our longstanding policy and current regulations, we annually review the IPO list to identify any services that should be removed from, or added to, the list, based on the most recent data and medical evidence available. We have established five criteria to determine whether a procedure should be removed from the IPO list (65 FR 18455), which we codified in the CY 2022 OPPS/ASC final rule with comment period (86 FR 63676). As noted in the CY 2012 OPPS/ ASC final rule with comment period (76 FR 74353), we assess whether a procedure or service met these criteria to determine if it should be removed from the IPO list and assign to an APC group for payment under the OPPS when provided in the hospital outpatient setting. We have explained that while we only require a service to meet one criterion to be considered for removal, satisfying only one criterion does not guarantee that the service will be removed; instead, the case for removal is strengthened with the more criteria the service meets. The criteria for assessing procedures for removal from the IPO list are: • Most outpatient departments are equipped to provide the service or procedure to the Medic he more criteria the service meets. The criteria for assessing procedures for removal from the IPO list are: • Most outpatient departments are equipped to provide the service or procedure to the Medicare population. • The simplest service or procedure described by the code may be performed in most outpatient departments. • The service or procedure is related to codes that CMS has already removed from the Inpatient Only list. • CMS determines that the service or procedure is being performed in numerous hospitals on an outpatient basis. • CMS determines that the service or procedure can be appropriately and safely performed in an ambulatory surgical center, and is specified as a covered ambulatory surgical procedure, or CMS has proposed to specify it as a covered ambulatory surgical procedure. We encouraged interested parties, including professional societies, hospitals, surgeons, hospital VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00191 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 33666 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules associations, and benefici 2.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 33666 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules associations, and beneficiary advocacy groups, to evaluate the IPO list and determine whether services should be added to or removed from the list. We requested that they submit corresponding evidence in support of their claims that a code or group of codes met the longstanding criteria for removal from the IPO list and is safe to perform on the Medicare population in the hospital outpatient setting— including, but not limited to case reports, operative reports of actual cases, peer-reviewed medical literature, medical professional analysis, clinical criteria sets, and patient selection protocols (67 FR 66740). Our clinicians thoroughly review all information submitted within the context of the established criteria and if, following this reviewed, we determined that there was sufficient evidence to confirm that the medical procedure represented by the code could be safely and appropriately performed on an outpatient basis, we assigned the service to an APC and included it as a payable procedure under the OPPS(6 medical procedure represented by the code could be safely and appropriately performed on an outpatient basis, we assigned the service to an APC and included it as a payable procedure under the OPPS(67 FR 66740). We determine the APC assignment for services removed from the IPO list by evaluating the clinical similarity and resource costs of the service compared to other services paid under the OPPS and reviewing the Medicare Severity Diagnosis Related Groups (MS–DRG) rate for the service under the IPPS. It should be noted, however, that we would generally expect the cost to provide a service in the outpatient setting to be less than the cost to provide the service in the inpatient setting (67 FR 66740). As we have stated in prior rulemaking, over time, given advances in technology and surgical technique, we will continue to evaluate services to determine whether they should be removed from the IPO list. We have made it clear that, insofar as advances in medical practice mitigate concerns about these procedures being performed on an outpatient basis, we are prepared to remove procedures from the IPO list and provide for payment for them under the OPPS (65 FR 18443). C. Proposed CY rns about these procedures being performed on an outpatient basis, we are prepared to remove procedures from the IPO list and provide for payment for them under the OPPS (65 FR 18443). C. Proposed CY 2026 Changes to IPO List 1. CY 2026 Proposal To Eliminate the IPO List Since the IPO list was established in 2000, it has been our policy that, regardless of how a procedure is classified for the purposes of payment, we expect in every case the surgeon and the hospital will assess the risk of a procedure or service to the individual patient, taking site of service into account, and will act in that patient’s best interests (65 FR 18456). We have reiterated this expectation in rulemaking over the years, including in our discussion of the removal of total knee arthroplasty (TKA) from the IPO list in the CY 2018 OPPS/ASC final rule with comment period, total hip arthroplasty (THA) from the IPO list in the CY 2020 OPPS/ASC final rule with comment period, and lumbar spine fusion, shoulder joint reconstruction, and ankle reconstruction in CY 2021 (82 FR 59383; 84 FR 61354; 85 FR 86093). In those rules, we stated that the decision regarding the most appropriate care setting for a given surgic reconstruction, and ankle reconstruction in CY 2021 (82 FR 59383; 84 FR 61354; 85 FR 86093). In those rules, we stated that the decision regarding the most appropriate care setting for a given surgical procedure is a complex medical judgment made by the physician based on the beneficiary’s individual clinical needs and preferences and on the general coverage rules requiring that any procedure be reasonable and necessary. Over the course of the years since the establishment of the IPO list, we have received comments from some interested parties who believe that we should eliminate the IPO list entirely and, instead, defer to the clinical judgment of physicians for decisions regarding site of service. For example, in the CY 2000 final rule with comment period, in response to the establishment of the IPO list, certain commenters stated that they believed CMS was making decisions, such as the appropriate site of service for a particular medical procedure, that should be left to the discretion of surgeons and their patients (65 FR 18442 and 18455). In its 2001 and 2002 public meetings, the Advisory Panel on APC Groups supported eliminating the IPO list (67 FR 66722). We refer readers t tion of surgeons and their patients (65 FR 18442 and 18455). In its 2001 and 2002 public meetings, the Advisory Panel on APC Groups supported eliminating the IPO list (67 FR 66722). We refer readers to the CY 2021 OPPS/ASC final rule with comment period for additional discussion of the opposition to the IPO list, including its lack of deference to physician judgment, its adverse effect on advances in surgical care, and the expectation it can create that non-IPO services must be furnished in the outpatient setting (85 FR 86084 through 86089). Other interested parties have supported maintaining the IPO list and consider it an important tool to indicate which services are appropriate to furnish in the outpatient setting and to ensure that Medicare beneficiaries receive quality care. They have stated that many of the procedures that we currently designated as ‘‘inpatient only’’ are currently performed appropriately and safely only in the inpatient setting (65 FR 18442). We refer readers to the CY 2022 OPPS/ASC final rule with comment period for a summary of recent commenter concerns related to patient safety and quality of care in the absence of the IPO list (86 FR 63674). Interested p the CY 2022 OPPS/ASC final rule with comment period for a summary of recent commenter concerns related to patient safety and quality of care in the absence of the IPO list (86 FR 63674). Interested parties have also supported the use of the IPO list because services included on the IPO list are an exception to the 2-midnight rule and, as such, are considered appropriate for payment under Medicare Part A, regardless of the expected length of stay. As a result, many procedures are not subject to medical review by the Beneficiary and Family-Centered Care Quality Improvement Organizations (BFCC–QIOs) for ‘‘patient status’’ (that is, site-of-service). We note that, in the CY 2020 OPPS/ASC final rule with comment period, we finalized a policy to exempt procedures that have been removed from the IPO list from certain medical review activities for 2 calendar years following their removal from the IPO list. In the CY 2021 OPPS/ASC final rule with comment period, we finalized a policy to indefinitely exempt such procedures from those medical review activities while the IPO list was eliminated over 3 years. For CY 2026 and subsequent years, we propose to eliminate the IPO list through a 3-ye nitely exempt such procedures from those medical review activities while the IPO list was eliminated over 3 years. For CY 2026 and subsequent years, we propose to eliminate the IPO list through a 3-year transition, completing the elimination by January 1, 2029. While we agreed with commenters in previous rulemakings that the IPO list was necessary, and that it would be inappropriate for us to establish payment rates for those services under the OPPS (78 FR 75055, 86 FR 63673), we have reconsidered the various comments from interested parties requesting that we eliminate the IPO list, and reevaluated the need for CMS to restrict payment for certain procedures in the hospital outpatient setting. As a result of that reconsideration, we no longer believe there is a need for the IPO list to identify services that require inpatient care. We agree with past commenters that the physician should use clinical knowledge and judgment, together with consideration of the beneficiary’s specific needs, to determine whether a procedure can be performed appropriately in a hospital outpatient setting or whether inpatient care is required for the beneficiary, subject to the general coverage rules requ , to determine whether a procedure can be performed appropriately in a hospital outpatient setting or whether inpatient care is required for the beneficiary, subject to the general coverage rules requiring that any procedure be reasonable and necessary. We believe that this change would ensure maximum availability of services to beneficiaries in the outpatient setting. Although we decided to halt the elimination of the IPO list in the 2022 OPPS/ASC final rule with comment period, for the reasons we discuss later in this section, we have come to believe with greater certainty that, since the IPO list was established, there have been VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00192 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 33667 significant developments in the practice of medicine that have allowed numerous services to now be provided safely and effectively in the outpatient setting. We acknowledged in the CY 2000 OPPS/ASC final rule with comment period that we believed that emerging new technologies and innova s to now be provided safely and effectively in the outpatient setting. We acknowledged in the CY 2000 OPPS/ASC final rule with comment period that we believed that emerging new technologies and innovative medical practice were blurring the difference between the need for inpatient care and the sufficiency of outpatient care for many services (65 FR 18456). We also stated in the CY 2001 OPPS/ASC interim final rule with comment period that, over time, given advances in technology and surgical technique, many of the procedures that were on the IPO list at the time may eventually be performed safely in a hospital outpatient setting and that we would continue to evaluate services to determine whether they should be removed from the IPO list (65 FR 67826). Specifically, we stated that, insofar as advances in medical practice mitigate concerns about these services being furnished on an outpatient basis, we would be prepared to remove them from the IPO list and provide for payment under the OPPS (65 FR 67826). Over the course of the last 25 years, these expectations have been borne out. There have been many new technologies and advances in surgical techniques and surgical care protocols, i PS (65 FR 67826). Over the course of the last 25 years, these expectations have been borne out. There have been many new technologies and advances in surgical techniques and surgical care protocols, including the use of minimally invasive surgical procedures such as laparoscopy, improved perioperative anesthesia, expedited rehabilitation protocols, as well as significant enhancements to postoperative processes such as improvements in pain management, that have reduced the inpatient length of stay and the need for postoperative care following a surgical service. In consideration of these advancements, we have removed certain services from the IPO list that were previously considered to require inpatient care, including musculoskeletal procedures such as TKA in CY 2018 (82 FR 59385), THA in CY 2020 (84 FR 61355), and lumbar spine fusion, shoulder joint reconstruction, and ankle reconstruction in CY 2021 (85 FR 86093). Since we previously considered elimination of the IPO list in the CY 2021 OPPS/ASC rule final rule with comment period, there have also been other innovations in the practice of medicine; for example, innovations in infection control spurred by the COVID– 19 PHE (87 FR 021 OPPS/ASC rule final rule with comment period, there have also been other innovations in the practice of medicine; for example, innovations in infection control spurred by the COVID– 19 PHE (87 FR 72194). During that time, CMS issued flexibilities in the furnishing of acute hospital services at different locations, including the patient’s home. While this Acute Hospital at Home Initiative was originally spurred by the necessity of expanding hospital capacity, it has demonstrated an increased ability to deliver certain services outside of the traditional inpatient setting. Congress accordingly extended this initiative through 2024 in section 4140 of the Further Consolidated Appropriations Act, 2023 (Pub. L. 117–328 (Dec. 29, 2022)). These advances have heightened awareness of practices that can increase patient safety across provider types, ensuring that clinicians emphasize these considerations in the practice of medicine, including site of service decisions. As medical practice continues to develop, we believe that the difference between the need for inpatient care and the appropriateness of outpatient care will continue to be less and less distinct for many services. Therefore tinues to develop, we believe that the difference between the need for inpatient care and the appropriateness of outpatient care will continue to be less and less distinct for many services. Therefore, we believe that the IPO list is no longer necessary to identify services that require inpatient care. In recent years, there have also been certain procedures which we have decided to remove from the IPO list multiple times. For example, we removed several maxillofacial procedures in CY 2023, after originally removing them from the IPO list in CY 2021 and adding them back in CY 2022 (87 FR 72009). This frequency of change in policy can cause an uncertain regulatory landscape in which hospitals and providers are unclear on the policy and whether or not certain procedures are paid for in the hospital outpatient setting, potentially impacting access to care for beneficiaries. Eliminating the IPO list and the related annual review process would mitigate this issue, offering more regulatory certainty for Medicare beneficiaries and providers. Enabling IPO list services to be delivered outside of the inpatient setting, when clinically appropriate, can also advance important goals related to ertainty for Medicare beneficiaries and providers. Enabling IPO list services to be delivered outside of the inpatient setting, when clinically appropriate, can also advance important goals related to access to care. In the past, we have noted longstanding concerns over the closures of rural hospitals, which has prompted other policy actions to maximize access to care in rural or underserved areas (87 FR 72160). The experience of the COVID–19 PHE has also highlighted the importance of assisting areas and populations that suffer from a lower supply of medical services, which we addressed with temporary flexibilities during the COVID–19 PHE. Allowing for a greater exercise of clinical judgment will increase the ability of hospitals to provide Medicare-reimbursed services on an outpatient basis when clinically appropriate, while preserving inpatient beds for individual patients who truly need to be admitted. This will increase the availability of such services and additionally provide facilities with greater experience and flexibility that can be particularly crucial during future public health emergencies that constrict the supply of medical care. We acknowledge the seriousness of th ilities with greater experience and flexibility that can be particularly crucial during future public health emergencies that constrict the supply of medical care. We acknowledge the seriousness of the concerns regarding patient safety and quality of care that various interested parties have expressed regarding removing procedures from the IPO list or eliminating the IPO list altogether. However, we believe that the evolving nature of the practice of medicine has mitigated, and continues to mitigate, patient safety and quality of care risks. That allows more procedures to be performed on an outpatient basis with a shorter recovery time. This trend, combined with physician judgment, state and local licensure requirements, accreditation requirements, hospital conditions of participation (CoPs), medical malpractice laws, and CMS quality and monitoring initiatives and programs, will continue to ensure the safety of beneficiaries in both the inpatient and outpatient settings, even in the absence of the IPO list. As mentioned previously in this section, we have consistently believed that it is important for physicians to exercise their clinical expertise based on the circumstances of ind sence of the IPO list. As mentioned previously in this section, we have consistently believed that it is important for physicians to exercise their clinical expertise based on the circumstances of individual patients and in light of these protections. We refer readers to the CY 2021 OPPS/ASC final rule with comment period for a full discussion of how these factors provide extensive safeguards for patients receiving services from Medicare enrolled providers, including hospital CoPs in 42 CFR part 482 (such as the requirement at § 482.30 that hospitals conduct a utilization review on medical necessity of admission, length of stay, and services rendered, and the most efficient use of available health facilities and services) (85 FR 48910). 2. CY 2026 Proposal To Use a 3-Year Transition To Eliminate the IPO List We propose to eliminate the IPO list over a 3-year transition period, beginning in CY 2026. We also propose eliminating the criteria for removing procedures from the IPO list currently codified at § 419.23, as a conforming change. Given the significant number of services on the list and that we would establish new reimbursement rates for those services under the OPPS, we recogn ntly codified at § 419.23, as a conforming change. Given the significant number of services on the list and that we would establish new reimbursement rates for those services under the OPPS, we recognize that interested parties may need time to adjust to the removal of procedures from the list. Providers may need time to prepare to furnish newly removed procedures on an outpatient basis, update their billing systems, and gain experience with newly removed procedures eligible to be paid under either the IPPS or OPPS. Therefore, we VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00193 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 33668 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules propose to transition services off of the IPO list over a 3-year period, with the list completely eliminated by CY 2029. In accordance with this proposal, we propose to amend § 419.22(n) to state that effective beginning on January 1, 2026, the Secretary shall eliminate the list of services and procedures designated as requiring inpatient care through a 3-year transition, with the full li tate that effective beginning on January 1, 2026, the Secretary shall eliminate the list of services and procedures designated as requiring inpatient care through a 3-year transition, with the full list eliminated in its entirety by January 1, 2029. For CY 2026, we propose that musculoskeletal services would be the first group of services that would be removed from the IPO list, as we had done in the CY 2021 OPPS/ASC final rule with comment period. We believe it is appropriate to remove this group of services first for several reasons. In recent years, due to new technologies and advances in surgical care protocols, expedited rehabilitation protocols, improved infection control practices, and significant enhancements to postoperative processes, we have removed TKA and THA, both musculoskeletal services, from the IPO list. During the COVID–19 PHE, there was an accelerated decrease in short- length inpatient stays associated with musculoskeletal procedures—a decrease which was about four times faster than before the COVID–19 PHE (14.5 percent from 2020 to 2021). The number of Medicare ASCs specializing in orthopedic or musculoskeletal services also roughly doubled between 2016 and 20 times faster than before the COVID–19 PHE (14.5 percent from 2020 to 2021). The number of Medicare ASCs specializing in orthopedic or musculoskeletal services also roughly doubled between 2016 and 2021. These trends suggest a shift in musculoskeletal services from inpatient to outpatient settings.98 Furthermore, during the notice and comment process of removing TKA and THA from the IPO list, interested parties continually requested that CMS remove other musculoskeletal services from the IPO list as well, citing shortened length of stay times, advancements in technologies and surgical techniques, and improved postoperative processes. Additionally, we note that, more often than not, interested parties’ historical requests for removals of medical procedures from the IPO list were for musculoskeletal services. Further, there is already a set of C–APCs for musculoskeletal services for payment in the outpatient setting, which facilitates the removal of these types of services from the IPO list for CY 2026. Specifically, because we have previously removed codes corresponding to musculoskeletal services from the IPO list that are similar clinically and in terms of 98 https://www.medpac.go ist for CY 2026. Specifically, because we have previously removed codes corresponding to musculoskeletal services from the IPO list that are similar clinically and in terms of 98 https://www.medpac.gov/wp-content/uploads/ 2023/03/Mar23_MedPAC_Report_To_Congress_ SEC.pdf. resource cost and assigned them to these C–APCs, these APCs generally describe appropriate ranges and placements for these musculoskeletal codes being proposed for removal in CY 2026, which will allow for appropriate payment. As discussed in section III.E.3. of this rule, we also propose to establish a 7 level Musculoskeletal Procedures APC series, which will allow for the assignment of musculoskeletal procedures removed from the IPO list to an APC with an applicable range of estimated costs. We had previously finalized the removal of 266 musculoskeletal procedures from the IPO list in the 2021 OPPS/ASC final rule. Although we largely reversed this action in the 2022 OPPS/ASC final rule based on our halting of the elimination of the IPO list and re-evaluation of our removal criteria at the time, we maintained the removal of seven musculoskeletal procedures, and their related anesthesia services, from the IPO list. ination of the IPO list and re-evaluation of our removal criteria at the time, we maintained the removal of seven musculoskeletal procedures, and their related anesthesia services, from the IPO list. In the CY 2023 OPPS/ASC final rule, we removed 11 more musculoskeletal services from the IPO list. As we have explained, we now believe the entire IPO list should be eliminated over a 3-year transition period. Our previous consideration of removing musculoskeletal procedures from the IPO list, and the continued removal of such procedures from it, suggests that we should begin the elimination and transition from the IPO list with the removal of these procedures from the list. For CY 2026, we have identified 285 mostly musculoskeletal services that we propose to remove from the IPO list, including 16 non-musculoskeletal services that were recommended by the 2020 HOP Panel and removed from the IPO list in CY 2021 (85 FR 86089 through 86092). These 16 services, which include cardiovascular, lymphatic, digestive, gynecological, and endovascular procedures, were added back to the IPO list when the elimination of the IPO list was halted in CY 2022. The 285 services that we propose to remove f mphatic, digestive, gynecological, and endovascular procedures, were added back to the IPO list when the elimination of the IPO list was halted in CY 2022. The 285 services that we propose to remove from the IPO list for CY 2026 and subsequent years, including the CPT/HCPCS code, long descriptor, and the proposed CY 2026 payment indicators, are included in Table 69. These services and their proposed status indicators and APC assignments (if applicable) are included in Addendum B of this proposed rule as well. The complete list of codes that describe services that will be paid by Medicare in CY 2026 as inpatient only services is included as Addendum E to this CY 2026 OPPS/ASC proposed rule, which is available on the CMS website.99 3. Effect on Beneficiary Cost-Sharing As noted in the CY 2021 OPPS/ASC final rule, some interested parties have shared concerns with us that removing procedures from the IPO list and allowing them to be paid under the OPPS when performed in the outpatient setting may result in an increased financial burden for beneficiaries for certain complex services (85 FR 86086). Under current law, the OPPS cost- sharing for a service is capped at the applicable Part A ing may result in an increased financial burden for beneficiaries for certain complex services (85 FR 86086). Under current law, the OPPS cost- sharing for a service is capped at the applicable Part A hospital inpatient deductible amount for that year for each service. This cap applies to individual services, and some commenters have expressed concern in the past that if a Medicare beneficiary receives multiple separately payable OPPS services, it is possible that the aggregate cost-sharing for a beneficiary may be higher for services provided in the outpatient setting than it would be had the services been furnished during an inpatient stay. However, we emphasize that services included on the IPO list tend to be surgical procedures that would typically be the focus of the hospital outpatient stay and would likely be assigned to a comprehensive APC (C–APC) when they are removed from the IPO list. As such, these services would likely be considered a single episode of care with one payment rate and one copayment amount, instead of multiple copayments for each individual service. In most instances, we expect that beneficiaries will not be responsible for multiple copayments for indivi nt rate and one copayment amount, instead of multiple copayments for each individual service. In most instances, we expect that beneficiaries will not be responsible for multiple copayments for individual ancillary services removed from the IPO list since, because of their assignment to C– APCs, the inpatient deductible cap will apply to the entire hospital claim which is billed and paid as a comprehensive service or procedure. In the event there are separately payable OPPS services included on a claim with a service assigned to a C–APC, the policy that the OPPS cost-sharing for an individual service is capped at the applicable Part A hospital inpatient deductible amount for that year for each service remains applicable, which is that the OPPS cost- sharing for an individual service is capped at the applicable Part A hospital inpatient deductible amount for that year for each service. For further information regarding beneficiary 99 In this rulemaking, we propose to eliminate, the IPO list, beginning in CY 2026, with all services being removed from the list over the course of a three-year transition period. The CY 2026 IPO List can be found here: Hospital Outpatient PPS, https:// w list, beginning in CY 2026, with all services being removed from the list over the course of a three-year transition period. The CY 2026 IPO List can be found here: Hospital Outpatient PPS, https:// www.cms.gov/Medicare/Medicare-Fee-for-Service- Payment/HospitalOutpatientPPS/index. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00194 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 33669 copayments, please refer to section II.I. of this proposed rule. 4. Exemption From Certain Medical Review Activities for Services Removed From the IPO List To further address concerns from interested parties, we propose to continue to exempt procedures that have been removed from the IPO list from certain medical review activities to assess compliance with the 2-midnight rule until the Secretary determines that the service or procedure is more commonly performed in the Medicare population in the outpatient setting. Specifically, we propose to continue the indefinite exemption from site-of- service claim denials, referrals to Recovery Au ore commonly performed in the Medicare population in the outpatient setting. Specifically, we propose to continue the indefinite exemption from site-of- service claim denials, referrals to Recovery Audit Contractors (RACs), and RAC reviews for ‘‘patient status’’ for procedures that are removed from the IPO list under the OPPS beginning on January 1, 2021, as part of the transition away from the IPO list (85 FR 86120). Pursuant to this exemption, initial medical review contractors may continue to review claims for procedures previously on the IPO list in order to provide education for practitioners and providers regarding compliance with the 2-midnight rule, but will not deny claims identified as noncompliant with respect to the site- of-service under Medicare Part A. We propose that this exemption will continue for all services or procedures removed from the IPO list until the Secretary determines that the exemption is no longer appropriate for each specific service or procedure because it is more commonly performed in the outpatient setting. We are also seeking comment on whether other exemption periods may be more warranted. For more information on this proposal and the 2-Midnigh e it is more commonly performed in the outpatient setting. We are also seeking comment on whether other exemption periods may be more warranted. For more information on this proposal and the 2-Midnight rule, please refer to section X.D. of this proposed rule. Although we believe it is important to pause certain medical review activities related to patient status to allow providers time to adjust to the proposed changes to the IPO list, we note that initial medical review contractors routinely address, and will continue to address, any beneficiary quality of care complaints that include concerns about treatment as a hospital inpatient or outpatient, not receiving expected services, early discharge, and discharge planning. CMS’s case management system currently allows initial medical review contractors and CMS to monitor the frequency and status of beneficiary quality of care complaints and other beneficiary appeals by topic, provider type, and geographic area. These numbers are currently compiled by the BFCC–QIO national coordinating and oversight review contractor and reported to the QIOs and CMS leadership on a weekly basis for monitoring purposes. As previously noted, although we y compiled by the BFCC–QIO national coordinating and oversight review contractor and reported to the QIOs and CMS leadership on a weekly basis for monitoring purposes. As previously noted, although we propose to continue to indefinitely exempt procedures removed from the IPO list beginning on January 1, 2021, from site-of-service claim denials, referrals to RACs, and RAC reviews of ‘‘patient status,’’ medical review contractors would continue to conduct initial medical reviews concerning the medical necessity of both the services and the site of service, and will continue to be permitted and expected to deny claims if the service itself is determined not to be reasonable and medically necessary, as noted in the CY 2021 OPPS/ASC final rule (85 FR 86118). Therefore, given CMS’s increasing ability to measure the safety of procedures performed in the outpatient setting and to monitor the quality of care, in addition to the other safeguards detailed previously in this section, we now believe that quality of care is unlikely to be negatively affected by the elimination of the IPO list. However, we request that commenters submit evidence on what effect, if any, they believe eliminating th e that quality of care is unlikely to be negatively affected by the elimination of the IPO list. However, we request that commenters submit evidence on what effect, if any, they believe eliminating the IPO list may have on the quality of care. 5. Comment Solicitation on Order of Removal of Additional Clinical Families From the IPO List During the Transition To Complete Elimination of the IPO List As stated previously in this section, we propose to eliminate the current IPO list of 1,731 services, starting with the 285 mostly musculoskeletal-related services as provided in Table 69. We are requesting comments from the public on whether 3 years is an appropriate time frame for the transition, whether there are other services that would be ideal candidates for removal from the IPO list in the near term, given known technological and other advances in care, and the order of removal of additional clinical families of services, and/or specific services, for each of the CY 2027 and CY 2028 rulemakings, until the IPO list is completely eliminated. Additionally, we seek comment on whether we should restructure or create any new APCs or C–APCs to allow for efficient OPPS payment for services lemakings, until the IPO list is completely eliminated. Additionally, we seek comment on whether we should restructure or create any new APCs or C–APCs to allow for efficient OPPS payment for services that are removed from the IPO list. 6. Comment Solicitation on Changes to IPO List Removal Criteria In addition to our proposal to eliminate the IPO list over a 3-year period, we propose to eliminate the codified criteria for removing procedures from the IPO list at § 419.23. As mentioned previously in this section, we finalized the adoption of these longstanding criteria for removal procedures from the list in the CY 2022 OPPS/ASC final rule with comment period when we decided to halt the elimination of the IPO list (86 FR 63678). However, if we finalize our proposal to eliminate the IPO list in its entirety, there would no longer be any need to maintain a list of criteria for removing individual procedures from the list in any given year. However, we acknowledge that some commenters may disagree with our proposed approach to the IPO list. Therefore, we wish to consider other methods to provide greater deference to the medical judgment of clinicians besides eliminating the IPO list c disagree with our proposed approach to the IPO list. Therefore, we wish to consider other methods to provide greater deference to the medical judgment of clinicians besides eliminating the IPO list completely. We solicit comment on other approaches to provide greater flexibility in making site-of-service decisions, such as updating the list of criteria for removing procedures from the IPO list. In summary, given the developments in surgical technique and technological advances in the practice of medicine, as well as the various safeguards discussed previously in this section, we propose to eliminate the IPO list over the course of the next 3 years, starting with the removal of 285 mostly musculoskeletal- related services, as provided in Table 69, in CY 2026. We propose to amend § 419.22(n) to state that, effective beginning on January 1, 2026, the Secretary shall eliminate the list of services and procedures designated as requiring inpatient care through a 3-year transition period, with the list eliminated in its entirety by January 1, 2029. We believe that there are a number of safety mechanisms that would continue to ensure the safety of our beneficiaries and the quality of care th the list eliminated in its entirety by January 1, 2029. We believe that there are a number of safety mechanisms that would continue to ensure the safety of our beneficiaries and the quality of care, including physician judgment, State and local regulations, accreditation requirements, medical malpractice laws, hospital conditions of participation, and other CMS initiatives. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00195 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 33670 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 00196 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00197 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00198 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00199 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 0000 Frm 00198 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00199 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00200 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00201 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00202 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00203 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00204 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00205 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00206 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00207 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00208 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 2 0207 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00208 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00209 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00210 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 00211 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 33686 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules practices doubled from about 30 percent to about 60 percent.106 For some drug administration services for cancer care, provider consolidation increases the cost of outpatient chemotherapy treatment.107 Our policy in the CY 2019 OPPS/ASC final rule with comment period to pay for clinic visits in excepted off-campus PBDs at the PFS-equivalent rate addressed the financial incentive for only one type of service in one outpatient setting. However, the share of other ambula ay for clinic visits in excepted off-campus PBDs at the PFS-equivalent rate addressed the financial incentive for only one type of service in one outpatient setting. However, the share of other ambulatory services billed under the OPPS has continued to increase. For example, in its 2023 report, MedPAC stated that the share of chemotherapy services furnished in OPDs has grown from 35.2 percent in 2012 to 51.9 percent in 2021. HCPCS code 96413— which describes chemotherapy administration, intravenous infusion technique; up to 1 hour, single or initial substance/drug—is one of the most frequently billed drug administration codes in the OPPS. In 2025 this service has a physician office payment rate of around $119 dollars and an OPPS payment rate of approximately $341, making the same chemotherapy infusion service 186 percent more expensive in the OPD than in the physician office. Similarly, between 2012 and 2021, the OPD share of nuclear cardiography services has grown from 33.9 percent to 47.6 percent, and the OPD share of echocardiography services has grown from 31.6 percent to 43.1 percent.108 We are not aware of any clinical or other substantive change in the services provided that 47.6 percent, and the OPD share of echocardiography services has grown from 31.6 percent to 43.1 percent.108 We are not aware of any clinical or other substantive change in the services provided that would have led to the increases in the share of these services furnished in OPDs, as opposed to in other settings. The natural inference is that these changes result from financial incentives, and therefore are unnecessary increases in the volume of OPD services. We believe that financial incentives have driven volume from the office setting to the higher paying OPD setting, creating unnecessary increases in the volume of OPD services. We believe that this problem is pervasive and exists across service families. Any time a service is provided in the higher cost OPD when it could be provided safely in the physician office, but it is not because of financial incentives, that represents unnecessary utilization of the OPD setting. In CY 2019, we chose to start tackling this problem by addressing 106 https://www.healthaffairs.org/doi/10.1377/ hlthaff.2016.0830. 107 https://www.healthaffairs.org/doi/10.1377/ hlthaff.2016.0830. 108 https://www.medpac.gov/wp-content/uploads/ 2023/06/Jun23_Ch8 ing 106 https://www.healthaffairs.org/doi/10.1377/ hlthaff.2016.0830. 107 https://www.healthaffairs.org/doi/10.1377/ hlthaff.2016.0830. 108 https://www.medpac.gov/wp-content/uploads/ 2023/06/Jun23_Ch8_MedPAC_Report_To_ Congress_SEC.pdf. the clinic visit when provided in excepted PBDs. In that case, it was practical to address only a single code, G0463, the clinic visit. For CY 2026, we are proposing to address drug administration services provided at excepted PBDs. We propose to address payment for these services across the APC family, as we believe this volume control method should apply to all drug administration services at excepted PBDs. As discussed later in this section, in future years we plan to examine other APC families of services, such as imaging without contrast, and other settings, specifically on-campus outpatient clinic visits. Our authority under section 1833(t)(2)(F) of the Act to adopt a method to control unnecessary increases in the volume of covered outpatient department services authorizes us to address the consequences of these payment inequalities. Given these continued disparities, we believe it is necessary to further examine and refine our volume control rtment services authorizes us to address the consequences of these payment inequalities. Given these continued disparities, we believe it is necessary to further examine and refine our volume control method by identifying additional covered OPD services at high risk of unnecessarily shifting to the hospital setting based on financial incentives rather than medical necessity. We conducted analyses of several families of services paid under the OPPS and present our findings on the utilization and payment of drug administration services in the sections below. 3. Utilization of Drug Administration Services The high volume of drug administration services and the magnitude of rate differences between the physician office and OPD settings make it a family of services likely to migrate to a higher paying setting of care. Drug administration includes the intravenous or intramuscular administration of a range of medicines. Drug administration can be performed in either physician offices or OPDs. The effort to administer a drug does not meaningfully differ between a physician office or OPD. In the OPPS, drug administration is categorized into four levels of complexity. Payments are set at a c The effort to administer a drug does not meaningfully differ between a physician office or OPD. In the OPPS, drug administration is categorized into four levels of complexity. Payments are set at a category level, called an Ambulatory Payment Classification (APC). The APCs for drug administration are 5691, 5692, 5693, and 5694. Currently, 61 Healthcare Common Procedure Coding System (HCPCS) codes make up the four drug administration APCs. HCPCS codes that are similar in terms of cost and clinical attributes are placed in the same APC. All HCPCS codes in the same APC have the same OPPS payment rate. The individual HCPCS and APC assignments are available in Addendum B to this proposed rule. We evaluated the growth in volume and spending for multiple families of Ambulatory Payment Classifications (APCs) in OPDs across multiple years of claims data. Should commenters wish to replicate any of our analyses, the CMS website includes information about obtaining the ‘‘Limited Data Set,’’ https://www.cms.gov/data-research/ files-for-order/data-disclosures-and- data-use-agreements-duas/limited-data- set-lds through which OPPS claims data is available for purchase. We found that there has bee ://www.cms.gov/data-research/ files-for-order/data-disclosures-and- data-use-agreements-duas/limited-data- set-lds through which OPPS claims data is available for purchase. We found that there has been an increase in volume of services paid through the drug administration APCs (5691–5694) over time, which would indicate that there has been migration of these services to the OPD setting. From 2011 to 2019 the volume of drug administration services paid under these APCs grew by almost 35 percent. This growth persisted even with the introduction of the PFS- equivalent rate for PBDs subject to section 603 of the Bipartisan Budget Act of 2015 starting in 2017. The COVID–19 Public Health Emergency (PHE) did impact utilization across the OPPS, but we have seen the volume of drug administration services rebound and return to this pattern of growth. Between 2018 and 2024 the number of beneficiaries enrolled in fee-for-service Medicare decreased by over 14 percent.109 Since 2022, we have simultaneously seen increases in the volume of drug administration services provided in OPDs utilized per beneficiary.110 Meaning that while there are now fewer Medicare fee-for-service beneficiaries than th neously seen increases in the volume of drug administration services provided in OPDs utilized per beneficiary.110 Meaning that while there are now fewer Medicare fee-for-service beneficiaries than there were prior to the COVID–19 PHE, each beneficiary on average is receiving more drug administration services in the OPD setting than they were prior to the COVID–19 PHE. In addition to looking at the growth in volume and spending at the APC level, we looked at the growth in volume at the HCPCS code level and found that some HCPCS codes within the drug administration APCs have experienced significant growth. HCPCS code 96413—which describes chemotherapy administration, intravenous infusion technique; up to 1 hour, single or initial substance/drug—is the most frequently billed HCPCS code within any of the drug administration APCs at excepted PBDs. This code has seen an almost 70 percent increase in volume from 2011 to 109 https://data.cms.gov/summary-statistics-on- beneficiary-enrollment/medicare-and-medicaid- reports/medicare-monthly-enrollment. 110 Based on our analysis of claims data and Medicare FFS enrollment. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00212 Fmt 4 edicare-and-medicaid- reports/medicare-monthly-enrollment. 110 Based on our analysis of claims data and Medicare FFS enrollment. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00212 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 33687 2023.111 In 2025, this service has a physician office payment rate of around $119 dollars and an OPPS payment rate of approximately $341. That makes the same chemotherapy infusion service 184 percent more expensive in the OPD than in the physician office. We conclude that this 70 percent increase in excepted hospital outpatient department volume over a 10-year period was at least partially driven by the payment differential between the physician office and OPD setting. The HCPCS codes representing chemotherapy administration grew in volume by 64 percent in the OPPS between 2011 and 2023.112 The chemotherapy administration codes represent some of the highest cost and most frequently billed services within the drug administration APCs. MedPAC found that from 2015 to 2021, the volume of che The chemotherapy administration codes represent some of the highest cost and most frequently billed services within the drug administration APCs. MedPAC found that from 2015 to 2021, the volume of chemotherapy administration in freestanding clinician offices, the ambulatory setting for which payment rates are usually lowest, fell 14.2 percent.113 We conclude that if there was not a difference in payment rates, fewer of these services would have shifted to the hospital outpatient setting and the corresponding increase in Medicare payments and beneficiary cost-sharing would not have occurred. We are also concerned about beneficiaries who pay higher cost sharing because of the payment incentives driving them to OPDs. Drug administration services are skewed toward a small portion of the population with high utilization. Cancer patients receiving chemotherapy are among the highest utilizers of these services. The administration of chemotherapy highlights that a small portion of the population is disproportionately harmed by the current state of drug administration payment in the OPPS. A meaningful number of beneficiaries in this cohort are paying substantially more per year in cost shar on is disproportionately harmed by the current state of drug administration payment in the OPPS. A meaningful number of beneficiaries in this cohort are paying substantially more per year in cost sharing than they would had they received the same treatments at freestanding facilities or non-excepted off-campus PBDs.114 Focusing on the cost sharing of chemotherapy patients demonstrates how this cohort is disproportionately impacted by the current payment structure and is uniquely positioned to 111 Based on our analysis of claims data. 112 HCPCS included in the chemotherapy administration category are:96423, 96549, 96401, 96402, 96405, 96411, 96415, 96417, 96406, 96409, 96422, 96542, 96413, 96416, 96420, 96425, 96440, 96446, 96450, G0498. benefit from an appropriate application of our authority to control for unnecessary increases in the volume of OPD services. Indeed, one study found that ‘‘in 2021, approximately 74,000 Medicare FFS chemotherapy patients utilized excepted off-campus OPDs and would have had cost sharing expenses that were $292 lower per patient had site neutrality applied. For the highest utilizing 5,000 patients who received chemotherapy most frequently at excepted s and would have had cost sharing expenses that were $292 lower per patient had site neutrality applied. For the highest utilizing 5,000 patients who received chemotherapy most frequently at excepted off-campus OPDs, cost sharing would have been $1,055 lower per patient if payments had been site neutral.’’ 115 While there have been increases in the volume of drug administration services in the hospital outpatient setting in recent years, drug administration services are still frequently provided in freestanding facilities. One study found that 68 percent of drug administration services currently take place in physician offices, indicating that they are safely performed in multiple settings.116 In its 2023 report, MedPAC examined APCs for which it might be appropriate to make a site neutral payment. To identify appropriate APCs they compared the volume of services in each APC that was provided in OPDs, ASCs, and freestanding offices over the period of 2016 through 2021, but omitted 2020 because the coronavirus pandemic affected the volume of care in ambulatory settings. If freestanding offices had the highest volume for an APC, they concluded that the services in that APC could be p because the coronavirus pandemic affected the volume of care in ambulatory settings. If freestanding offices had the highest volume for an APC, they concluded that the services in that APC could be provided safely in freestanding offices for most beneficiaries and that beneficiaries would be able to access the services in that APC. Therefore, for those services, it would be reasonable to align the OPPS payment rates with the PFS payment rates. MedPAC found that all four of the drug administration APCs had higher volume in freestanding facilities than in OPDs, indicating that these services can be safely provided to beneficiaries in a lower cost setting of care. We believe MedPAC’s analysis aligns well with the rationale CMS adopted in the CY 2019 OPPS/ASC final rule with comment period: we consider OPPS utilization unnecessary if the beneficiary can safely receive the same services in a lower cost setting but instead receives care in the hospital 113 https://www.medpac.gov/wp-content/uploads/ 2023/06/Jun23_Ch8_MedPAC_Report_To_ Congress_SEC.pdf. 115 https://craftmediabucket.s3.amazonaws.com/ uploads/Drug-Admin-Off-Campus-Site-Neutrality- 2023.10.18.pdf. outpatient setting because uploads/ 2023/06/Jun23_Ch8_MedPAC_Report_To_ Congress_SEC.pdf. 115 https://craftmediabucket.s3.amazonaws.com/ uploads/Drug-Admin-Off-Campus-Site-Neutrality- 2023.10.18.pdf. outpatient setting because of site-of- service payment differentials. In our review of the utilization of drug administration services in excepted PBDs we found increases in the volume of services over time, increases in the volume of services provided per beneficiary, and cases of significant volume growth for some individual HCPCS codes within the drug administration APC family. We believe that these changes represent unnecessary increases in the volume of covered outpatient department drug administration services and that it would be appropriate to apply our volume control method to these services. 4. Payment for Drug Administration Services at PBDs As discussed in the CY 2017 OPPS/ ASC final rule with comment period (81 FR 33648), we established a PFS relativity adjuster that is applied to the OPPS rate for the billed non-excepted items and services furnished in a non- excepted off-campus PBD in order to calculate payment rates under the PFS. The PFS relativity adjuster reflects the estimated overall differe billed non-excepted items and services furnished in a non- excepted off-campus PBD in order to calculate payment rates under the PFS. The PFS relativity adjuster reflects the estimated overall difference between the payment that would otherwise be made to a hospital under the OPPS for the non-excepted items and services furnished in non-excepted off-campus PBDs and the resource-based payment under the PFS for the technical aspect of those services with reference to the difference between the facility and nonfacility (office) rates and policies under the PFS. The current PFS relativity adjuster is set at 40 percent of the amount that would have been paid under the OPPS (82 FR 53028). Non- excepted PBDs are required to use the modifier ‘‘PN’’ so that the PFS relativity adjuster is applied to the payment of their claim. Excepted PBDs use the modifier ‘‘PO’’ on their claims to indicate that the service was provided at an excepted off-campus PBD and that payment should generally be made at the OPPS rate. In the CY 2019 OPPS/ASC final rule with comment period, we stated that we consider the shift of services from the physician office to the hospital outpatient department unnecessary if t the OPPS rate. In the CY 2019 OPPS/ASC final rule with comment period, we stated that we consider the shift of services from the physician office to the hospital outpatient department unnecessary if the beneficiary can safely receive the same services in a lower cost setting but is instead receiving services in the higher paid setting due to payment incentives.117 In order to better understand the migration of services in 117 https://www.federalregister.gov/documents/ 114 https://craftmediabucket.s3.amazonaws.com/ uploads/Drug-Admin-Off-Campus-Site-Neutrality- 2023.10.18.pdf. 116 https://craftmediabucket.s3.amazonaws.com/ uploads/Drug-Admin-Off-Campus-Site-Neutrality- 2023.10.18.pdf. 2018/11/21/2018-24243/medicare-program- changes-to-hospital-outpatient-prospective- payment-and-ambulatory-surgical-center. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00213 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 33688 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules OPDs we analyzed claims data for drug administration services to assess whether increases in volume and spendi h k 33688 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules OPDs we analyzed claims data for drug administration services to assess whether increases in volume and spending could be driven by payment incentives. We examined the top twenty most frequently billed HCPCS codes in the drug administration APC family at both excepted and non-excepted off- campus PBDs. Twenty HCPCS codes account for over 98 percent of the volume of drug administration services in off-campus PBDs. We found that the top twenty most frequently billed HCPCS codes in the drug administration APCs when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act (departments that bill the modifier ‘‘PO’’ on claim lines) and off- campus PBDs that are not excepted from section 603 (departments that bill the modifier ‘‘PN’’), are the same with slight variations in the order based on volume. We know that there is claims volume for the overwhelming majority of HCPCS codes in the drug administration APCs with both the ‘‘PO’’ and ‘‘PN’’ modifiers. That indicates that the payment rate in non-excepted PBDs is sufficient and can support of the provision of these services in an of drug administration APCs with both the ‘‘PO’’ and ‘‘PN’’ modifiers. That indicates that the payment rate in non-excepted PBDs is sufficient and can support of the provision of these services in an off-campus PBD. We further used the PFS payment rates for the top twenty most frequently billed drug administration HCPCS codes by excepted PBDs (departments that bill the modifier ‘‘PO’’ on claim lines) and volume weighted them to create a PFS proxy APC payment rate for each of the four drug administration APCs. We found that for each of the four APC payment levels, the same services were paid 200–300 percent higher under the OPPS than under the PFS. The volume- weighted PFS payment for the drug administration APCs ranged from 24 percent to 33 percent of the OPPS payment. We conclude that the differential in our payment rates has created a payment incentive that has led to unnecessary growth for the services in the drug administration APCs. If the PFS payment rate for drug administration APCs ranges from 24 percent to 33 percent of the OPPS payment, then payment using the PFS relativity adjuster of 40 percent should sufficiently cover the cost of these services. We consider the shift of Cs ranges from 24 percent to 33 percent of the OPPS payment, then payment using the PFS relativity adjuster of 40 percent should sufficiently cover the cost of these services. We consider the shift of services from the physician office to the hospital outpatient department unnecessary if the beneficiary can safely receive the same services in a lower cost setting but is instead receiving services in the higher paid setting due to payment incentives. We believe the OPPS payment rate for drug administration APCs being several times greater than the PFS rate provides this payment incentive and that the growth in drug administration services paid under the OPPS over time is unnecessary. 5. Patient Severity and Cost of Care In comments to the CY 2019 OPPS/ ASC proposed rule and subsequent rulemaking, we heard from commenters that the higher payments for services in hospital outpatient settings are justified by the level of care patients need, the higher costs of providing care in hospitals, and the costs of maintaining emergency care and standby capacity. We recognize that OPDs serve unique patient populations and provide services to medically complex beneficiaries; however, there is no and the costs of maintaining emergency care and standby capacity. We recognize that OPDs serve unique patient populations and provide services to medically complex beneficiaries; however, there is no evidence to demonstrate the need for higher payment for services provided in OPDs that could also be provided in lower-cost settings. In general, despite marked differences in payment rates for a range of services, identical services are being delivered to very similar patients across physicians’ offices, hospital outpatient departments, and ASCs.118 119 Moreover, a 2023 literature review found no peer-reviewed evidence that shows differences in the quality of services delivered across hospital outpatient departments and physicians’ offices.120 In their 2023 report, MedPAC evaluated risk scores from the CMS hierarchical condition category (CMS– HCC) risk-adjustment model to compare the medical complexity of OPD patients 118 https://tobin.yale.edu/sites/default/files/2023- 10/Site-Neutral%20Payment%20Literature %20Review%2010302023.pdf. with patients in freestanding offices. They found that, on average, OPD patients have higher risk scores, which suggests that OPD patients are potentia 20Payment%20Literature %20Review%2010302023.pdf. with patients in freestanding offices. They found that, on average, OPD patients have higher risk scores, which suggests that OPD patients are potentially more medically complex than those in physician offices. However, they also found substantial overlap in the CMS–HCC risk scores of patients in these two settings, which suggests that the difference in patient severity between settings is small. Their analysis showed that the effects of patient severity on cost of care for the aligned services is not statistically significant as the services, like drug administration, are generally of low complexity. In addition, if there is a need to bill for more complex cases, under the OPPS providers can often bill separately for additional services that a patient might need. 6. Impact of Unnecessary Increases in Volume on the OPPS Our concern with unnecessary increases in the volume of drug administration services is tied to the health and sustainability of the OPPS. In the CY 2019 OPPS/ASC final rule with comment period, we found that the mean and median annual increase in the volume and intensity of hospital outpatient services was about 5.5 bility of the OPPS. In the CY 2019 OPPS/ASC final rule with comment period, we found that the mean and median annual increase in the volume and intensity of hospital outpatient services was about 5.5 percent and 5.4 percent, respectively, from 2011 to 2019. During this time period, the estimated increase in aggregate annual hospital reimbursements incurred through Medicare Fee for Service (FFS) Part B was $28.2 billion.121 As Table 70 shows, we projected that between 2019 and 2027, the cost of outpatient hospital services per FFS enrollee would grow at a mean of about 7.3 percent per year and a median of 8.1 percent per year. This accounts for a $27.2 billion increase in aggregate annual incurred reimbursements for hospitals in FFS Part B during that time, far exceeding the growth of other categories of Part B services in FFS in dollar terms.122 119 https://medpac.gov/wp-content/uploads/2023/ 06/Jun23_Ch8_MedPAC_Report_To_Congress_ SEC.pdf. 120 https://tobin.yale.edu/sites/default/files/2023- 121 Available in Table IV.B6 at https:// www.cms.gov/Research-Statistics-Data-and- Systems/Statistics-Trends-and-Reports/ ReportsTrustFunds/Downloads/TR2019.pdf. 10/Site-Neutral%20Payment%20Li s/2023- 121 Available in Table IV.B6 at https:// www.cms.gov/Research-Statistics-Data-and- Systems/Statistics-Trends-and-Reports/ ReportsTrustFunds/Downloads/TR2019.pdf. 10/Site-Neutral%20Payment%20Literature% 20Review%2010302023.pdf. 122 Available in Tables IV.B3 and B6 at https:// www.cms.gov/oact/tr/2024. 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 00214 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33689 As we stated in the CY 2019 OPPS/ ASC final rule with comment period, there is evidence that increased volume and intensity of certain covered OPD services is likely driven by financial incentives to furnish services in hospitals in order to receive higher reimbursement, rather than making site- of-service decisions based on medical necessity. We continue to be concerned with the rate of increase in program expenditures under the OPPS for several reasons. The OPPS was originally designed to manage Medicare spending growth by replacing a cost-based system with a prospective payment system. Contrary to this Cong itures under the OPPS for several reasons. The OPPS was originally designed to manage Medicare spending growth by replacing a cost-based system with a prospective payment system. Contrary to this Congressional purpose, the OPPS has continued to be the one of the fastest growing sectors of Medicare payments out of all payment systems under Medicare Parts A and B.124 Furthermore, we are concerned that the persisting rate of growth relative to other payment systems suggests that payment incentives, rather than patient acuity or medical necessity, continue to affect site-of-service decision-making. This site-of-service selection has an impact on not only the Medicare program, but also on Medicare beneficiary out-of-pocket spending. Therefore, to the extent that there are lower-cost sites-of-service available, we continue to believe that beneficiaries and the physicians treating them should have that choice and not be encouraged to receive or provide care in higher paid settings solely for financial reasons. Our authority to implement volume control 123 Available in Table IV.B3 at https:// www.cms.gov/oact/tr/2024. 124 https://www.gpo.gov/fdsys/pkg/FR-2018-11- 21/pdf/2018-24243.pdf. met financial reasons. Our authority to implement volume control 123 Available in Table IV.B3 at https:// www.cms.gov/oact/tr/2024. 124 https://www.gpo.gov/fdsys/pkg/FR-2018-11- 21/pdf/2018-24243.pdf. methods is an important tool in combating unnecessary OPPS utilization. We have seen success in stemming the unnecessary growth in the volume of off-campus clinic visits and believe off-campus drug administration services are in need of similar examination. As we stated in the CY 2019 OPPS/ ASC final rule with comment period, we consider the shift of services from the physician office to the hospital outpatient department unnecessary if the beneficiary can safely receive the same services in a lower cost setting but is instead receiving services in the higher paid setting due to payment incentives. We believe the increase in the volume of drug administration services is due to the payment incentive that exists to provide this service in the higher cost setting. Because these services could generally be safely provided in a lower cost setting, we believe that the growth in drug administration services paid under the OPPS is unnecessary. Further, we believe that paying for drug administrati nerally be safely provided in a lower cost setting, we believe that the growth in drug administration services paid under the OPPS is unnecessary. Further, we believe that paying for drug administration services provided at excepted off-campus departments at the PFS-equivalent rate would be an effective method to control the volume of these unnecessary services because the payment differential that is driving the site-of-service decision will be removed. In particular, we believe this method will control unnecessary volume increases both in terms of the number of covered outpatient department services furnished and costs associated with those services. Therefore, given the unnecessary increases in the volume of drug administration services in hospital outpatient departments, for the CY 2026 OPPS, we propose to use our authority under section 1833(t)(2)(F) of the Act to apply an amount equal to the site- specific PFS payment rate for nonexcepted items and services furnished by a non-excepted off-campus PBD (the PFS payment rate) for any HPCPCs codes assigned to the drug administration services APCs, when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act (dep epted off-campus PBD (the PFS payment rate) for any HPCPCs codes assigned to the drug administration services APCs, when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act (departments that bill the modifier ‘‘PO’’ on claim lines). Table 71 shows the specific APCs that we would identify for this proposal, which are APCs 5691–5694. Off-campus PBDs that are not excepted from section 603 (departments that bill the modifier ‘‘PN’’) already receive a PFS-equivalent payment rate for any HCPCS codes assigned to the drug administration services APCs. Additionally, this proposal aligns with President Trump’s Executive Order (E.O.) 14273, ‘‘Lowering Drug Prices by Once Again Putting Americans First.’’ 125 Section 11 of the E.O., ‘‘Reducing Costly Care for Seniors,’’ directs the Secretary to ‘‘evaluate and, if appropriate and consistent with applicable law, propose regulations to ensure that payment within the Medicare program is not encouraging a shift in drug administration volume away from less costly physician office settings to more expensive hospital outpatient departments.’’ 125 https://www.govinfo.gov/content/pkg/FR- 2025-04-18/pdf/2025-06837.pdf. VerDate Sep 2 ion volume away from less costly physician office settings to more expensive hospital outpatient departments.’’ 125 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 00215 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00216 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 00217 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 33692 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules adjustment under paragraph (t)(2)(E) to reflect the higher costs of hospitals in rural areas if the Secretary determined, pursuant to a study required by section 1833(t)(13)(A), that the costs to rural hospitals by APC exceeded those costs for hospitals in urban areas. Our analysis revealed that rural SCHs had significantly higher costs per unit than urban hospitals. We have continued to adjust payments for rural SCHs by 7.1 percent each ye hospitals in urban areas. Our analysis revealed that rural SCHs had significantly higher costs per unit than urban hospitals. We have continued to adjust payments for rural SCHs by 7.1 percent each year since 2006. As discussed in section II.E. of this proposed rule, for CY 2026 we propose to continue the current policy of utilizing a 7.1 percent payment adjustment for rural SCHs. As noted above, in the CY 2023 OPPS/ASC final rule with comment period we finalized an exemption to our policy to pay the PFS-equivalent rate for the clinic visit service at excepted off- campus PBDs to control unnecessary increases in the volume of covered OPD services. Commenters were generally supportive of this proposal and noted that rural SCHs are typically the chief, if not sole, source of community outpatient care for rural residents and opined that this exemption would be vital to ensuring continued access to the care they need. Some commenters stated that the exemption should be extended to other types of hospitals, including urban SCHs. In that rule, we explained that our analysis did not find that urban SCHs had the additional resource costs for covered outpatient department services that rura pes of hospitals, including urban SCHs. In that rule, we explained that our analysis did not find that urban SCHs had the additional resource costs for covered outpatient department services that rural SCHs have, and only finalized applying the clinic visit policy exemption to rural SCHs. b. Utilization of Drug Administration Services in Off-Campus Provider-Based Departments of Rurals SCHs Earlier in this section, where we propose the volume control method policy for drug administration services, we state that to the extent there are lower-cost sites of service available, beneficiaries and the physicians treating them should be able to choose the appropriate care setting and not be encouraged to receive or provide care in settings for which payment rates are higher solely for financial reasons. However, many rural providers, and rural SCHs in particular, are often the only source of care in their communities,132 which means beneficiaries and providers are not choosing between a higher paying off- campus PBD of a hospital and a lower paying physicians’ office setting. The closure of inpatient departments of 132 https://www.shepscenter.unc.edu/wp-content/ uploads/dlm_uploads/2017/11/ paying off- campus PBD of a hospital and a lower paying physicians’ office setting. The closure of inpatient departments of 132 https://www.shepscenter.unc.edu/wp-content/ uploads/dlm_uploads/2017/11/SCHs_Differences_ in_Community_Characteristics.pdf. hospitals and the shortage of primary care providers in rural areas likely further drives utilization to off-campus PBDs in areas where rural SCHs are located. We have reviewed utilization data for drug administration services at rural SCHs and have not found strong evidence that drug administration services are being utilized at an unnecessary volume at excepted off- campus PBDs of rural SCHs. As with clinic visits, we do not believe that rural SCH site-of-service decisions for drug administration are being made solely based on payment rates. Rural areas often experience lower availability of health care professionals and hospitals than urban areas.133 Hospital closures in rural communities are associated with lower access to health care and worse health outcomes.134 Access to outpatient services, particularly in rural areas, is vital to keeping beneficiaries healthy and out of the hospital because beneficiaries in rural settings fac and worse health outcomes.134 Access to outpatient services, particularly in rural areas, is vital to keeping beneficiaries healthy and out of the hospital because beneficiaries in rural settings face unique challenges that impact their health. In the CY 2023 OPPS/ASC final rule, we explained that we believe that exempting rural SCHs from the clinic visit policy would help to maintain access to care in rural areas by ensuring rural providers are paid for clinic visit services provided at off-campus PBDs at rates comparable to those paid at on- campus departments (87 FR 72049). We believe that a similar exemption would be warranted for the drug administration policy for similar reasons. Specifically, we are proposing to exempt rural SCHs from payment of the site-specific PFS-equivalent payment for drug administration services, as described by APC family 569X, when furnished at an off-campus PBD exempted from section 1833(t)(21) of the Act (departments that bill the modifier ‘‘PO’’ on claim lines). Under this proposed policy, a rural SCH would continue to bill services in APC family 569X with the ‘‘PO’’ modifier for CY 2026 and the payment rate for such services would continue be th laim lines). Under this proposed policy, a rural SCH would continue to bill services in APC family 569X with the ‘‘PO’’ modifier for CY 2026 and the payment rate for such services would continue be the full OPPS payment without the PFS relativity adjustment. This exemption, should it be finalized, would result in higher payments to excepted off-campus PBDs of rural SCHs compared to if it were not finalized and rural SCHs were subject to the proposed volume control method. The proposed CY 2026 OPPS full payment rates for drug administration 133 https://www.gao.gov/assets/gao-21-93.pdf. 134 Mills CA, Yeager VA, Unroe KT, Holmes A, Blackburn J. The impact of rural general hospital closures on communities—A systematic review of the literature. J Rural Health. 2024;40:238–248. https://doi.org/10.1111/jrh.12810. APCs 5691, 5692, 5693, and 5694 are $47.83, $74.57, $216.49, $341.52, respectively. The PFS-equivalent rates for these APCs, calculated by applying the 40 percent relativity adjuster to the OPPS payment rates for rural SCHs, would be $19.13, $29.83, $86.60, $136.61, respectively. By exempting rural SCHs, the Medicare payments for these services would remain at the OPPS level. We to the OPPS payment rates for rural SCHs, would be $19.13, $29.83, $86.60, $136.61, respectively. By exempting rural SCHs, the Medicare payments for these services would remain at the OPPS level. We estimate that exempting rural SCHs from the method to control unnecessary volume of drug administration services reduces the savings from this provision by approximately $16 million for CY 2026. Per treatment, exempting rural SCHs from this policy results in beneficiary cost sharing remaining between $5.74 and $40.98 higher than it would be should we not finalize this exemption, depending on the service. We note, however, that these figures do not represent increases in costs to Medicare or the beneficiaries above the current policy, as our proposed exemption would maintain current payment rates at excepted off-campus PBDs of rural SCHs of 107.1 percent of the OPPS payment rate for these services. These figures are solely for the purpose of comparing potential savings should we implement a method to control unnecessary volume in drug administration services without such an exemption. We invite comments on all aspects of the proposed exemption for rural SCHs from the method to control u method to control unnecessary volume in drug administration services without such an exemption. We invite comments on all aspects of the proposed exemption for rural SCHs from the method to control unnecessary volume of drug administration services. Specifically, we are requesting comments on whether such an exemption is appropriate for rural SCHs, what the impact on SCHs would be should we finalize the method without an exemption for rural SCHs, and whether we should consider any other hospital types for an exemption to either of the policies to control unnecessary volume of outpatient services at off- campus PBDs. Additionally, we are requesting comments on whether the current exemption for rural SCHs from the method to control unnecessary volume of clinic visit services remains appropriate. B. Request for Information: Adjusting Payment Under the OPPS for Services Predominately Performed in the Ambulatory Surgical Center or Physician Office Settings In general, Medicare payments to hospital outpatient departments under the Outpatient Prospective Payment System (OPPS) are higher than payments made to ASCs under the ASC payment system or to physician offices under the Physician Fe hospital outpatient departments under the Outpatient Prospective Payment System (OPPS) are higher than payments made to ASCs under the ASC payment system or to physician offices under the Physician Fee Schedule (PFS) VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00218 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 33693 for the same services. As discussed in section X.A. of this proposed rule, CMS has taken steps to address payment disparities between hospital outpatient departments and the physician office setting. While we believe that our regulatory and the related legislative efforts to control for unnecessary utilization and promote site neutrality in Medicare payments for OPD services has had a positive impact, there is evidence of continued growth in the volume of OPD services driven by site- of-service payment differentials. Building on the CY 2019 OPPS/ASC final rule with comment period policy for clinic visits, section X.A. of this proposed rule includes a proposal to pay off-campus PBDs otherwise excepted fferentials. Building on the CY 2019 OPPS/ASC final rule with comment period policy for clinic visits, section X.A. of this proposed rule includes a proposal to pay off-campus PBDs otherwise excepted under section 603 of the BBA at the equivalent of the site-specific PFS rate for drug administration services. While we have implemented site- neutral policies to pay for certain hospital outpatient clinic visits at a rate closer to that under the PFS and propose to expand this policy to drug administration services, we are seeking feedback for future rulemaking on the development of a more systematic process for identifying ambulatory services at high risk of shifting to the hospital setting based on financial incentives rather than medical necessity and adjusting payments according. Specifically, we seek feedback on the following questions: 1. What items and services paid under the OPPS may have experienced unnecessary increases in volume? Should any policies that address those increases be more targeted to those services that have the most notable increases in volume indicative of shifting care from the ASC or physician office setting to the hospital OPD setting? 2. Should we limit be more targeted to those services that have the most notable increases in volume indicative of shifting care from the ASC or physician office setting to the hospital OPD setting? 2. Should we limit OPPS payment for certain services to the payment made for that service under the ASC payment system or the PFS—depending on the setting where the service is performed most frequently? We note that the OPPS currently does not have a payment policy to limit OPPS payment rates to the rate under ASC payment system for procedures that are predominantly performed in an ASC. For example, while a simple cataract removal with insertion of an intraocular lens is a commonly-performed hospital outpatient surgical procedure, 82 percent of all such procedures that Medicare beneficiaries receive are performed in an ASC setting. In general, ASC payment rates are roughly 55 percent of the payment rate under the OPPS (86 FR 63485). 3. If we were to adjust payment based on the setting-specific volume of ambulatory services, should we pay the ASC payment amount if the service is predominantly performed in the ASC setting; and if the service is predominantly performed in the physician office setting, shoul latory services, should we pay the ASC payment amount if the service is predominantly performed in the ASC setting; and if the service is predominantly performed in the physician office setting, should we continue to calculate the PFS-equivalent rate using a PFS relativity adjuster that we would periodically update? 4. In determining the setting in which a service is performed most frequently, should we use the most recent data available or should we use data that is 5 or even 10 years prior to the rate- setting year? For example, as noted above, the share of chemotherapy administration services billed under the OPPS increased from 35.2 percent to 51.9 percent between 2012 and 2021, so using only more recent data may lead to the conclusion that most of these services take place in the hospital OPD setting, even if that was not historically true. For services that experienced this type of migration, we believe it may be prudent to attempt to address the accumulation of past unnecessary increases in volume rather than allow that shift and the underlying financial incentive that caused it to remain permanent. Should we use solely Medicare FFS data for our analysis or should we explore increases in volume rather than allow that shift and the underlying financial incentive that caused it to remain permanent. Should we use solely Medicare FFS data for our analysis or should we explore and potentially incorporate Medicare Advantage data into our work (to the extent feasible and practicable)? 5. How could we account for the availability of OPDs, ASCs, and physician offices in a geographic area when determining the setting in which a service is most frequently performed? If there is a shortage of one of these settings of care in a geographic area, would it be appropriate to tie payment for a service to a setting of care that may not be readily available to a beneficiary? 6. What are the best ways to address different packaging and bundling policies across ambulatory payment systems? The PFS has less packaging of ancillary items than the OPPS and ASC payment system and tends to provide separate payment more frequently. Conversely, certain surgical procedures that have a global code in the PFS may not be packaged in the OPPS or ASC payment systems and the packaging policies of the OPPS and ASC payment system are not based on the period of time elapsed before or after th obal code in the PFS may not be packaged in the OPPS or ASC payment systems and the packaging policies of the OPPS and ASC payment system are not based on the period of time elapsed before or after the procedure or service. We could consider retaining the original payment rate that would apply absent any expanded site neutral policies, or we could apply a payment adjustment that approximates the impact of the packaging policies in the payment system whose rate would apply to the item or service under the proposed ambulatory payment adjustment. 7. Should we exempt certain services from a larger site neutral policy if such services are delivered in relation to emergent care, trauma-related care, or other care where the hospital is the most appropriate setting regardless of whether the item or service is typically furnished in a different setting? We note that physicians are appropriately responsible for making site-of-service decisions based on their clinical expertise and may determine that the hospital OPD setting is most appropriate for their patient’s circumstances regardless of the level of Medicare payment. We solicit comment on the best way to designate items and services as b that the hospital OPD setting is most appropriate for their patient’s circumstances regardless of the level of Medicare payment. We solicit comment on the best way to designate items and services as being emergent or trauma-related and whether to include other categories of care or circumstances where certain items or services would be most appropriately paid at the OPPS rate regardless of the typical setting of care where they are furnished. 8. Should we apply OPPS site neutral policies more broadly to all hospital OPDs or should we instead consider applying this payment adjustment to only certain hospital OPDs, such as excepted off-campus hospital PBDs? 9. Should we exempt certain types of hospitals from a larger site neutral policy, such as rural Sole Community Hospitals, Medicare Dependent Hospitals, or Rural Emergency Hospitals? Currently, rural Sole Community Hospitals are exempted from the clinic visit site neutrality policy and instead are paid the full OPPS rate when such visits are furnished in excepted off-campus PBDs of these hospitals. 10. What other methods may be warranted to control unnecessary increases in the volume of outpatient services besides changes to paymen ts are furnished in excepted off-campus PBDs of these hospitals. 10. What other methods may be warranted to control unnecessary increases in the volume of outpatient services besides changes to payment rates, including prior authorization or other utilization management policies? 11. What impact would the proposed ambulatory payment adjustment have on beneficiaries and the health care market, including the development of or beneficiary access to new health care innovations? VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00219 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 33694 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules C. Virtual Direct Supervision of Cardiac Rehabilitation (CR), Intensive Cardiac Rehabilitation (ICR), Pulmonary Rehabilitation (PR) Services and Diagnostic Services Furnished to Hospital Outpatients 1. Background a. Virtual Direct Supervision of CR, ICR and PR Services Furnished to Hospital Outpatients (42 CFR 410.27(a)(1)(iv)(B)(1)) In the interim final rule with comment period titled ‘‘Policy and Regulatory Provisions in Response to the COVID , ICR and PR Services Furnished to Hospital Outpatients (42 CFR 410.27(a)(1)(iv)(B)(1)) In the interim final rule with comment period titled ‘‘Policy and Regulatory Provisions in Response to the COVID–19 Public Health Emergency,’’ published on April 6, 2020 (the April 6th COVID–19 IFC) (85 FR 19230, 19246, 19286), we changed the regulation at 42 CFR 410.27(a)(1)(iv)(D) 135 to provide that, during a Public Health Emergency (PHE) as defined in 42 CFR 400.200, the presence of the physician for purposes of the direct supervision requirement for PR, CR, and ICR services includes virtual presence through audio/video real-time communications technology when use of such technology is indicated to reduce exposure risks for the beneficiary or health care provider. Specifically, the required direct physician supervision can be provided through virtual presence using audio/ video real-time communications technology (excluding audio-only) subject to the clinical judgment of the supervising practitioner. We further amended § 410.27(a)(1)(iv)(B) 136 in the CY 2021 OPPS/ASC final rule with comment period to provide that this flexibility continues until the later of the end of the calendar year in oner. We further amended § 410.27(a)(1)(iv)(B) 136 in the CY 2021 OPPS/ASC final rule with comment period to provide that this flexibility continues until the later of the end of the calendar year in which the PHE as defined in § 400.200 ends or December 31, 2021 (85 FR 86113 and 86299). In the CY 2021 OPPS/ASC final rule with comment period we also clarified that this flexibility excluded the presence of the supervising practitioner via audio-only telecommunications technology (85 FR 86113). In the CY 2023 OPPS/ASC final rule with comment period, we finalized a policy to extend the revised definition of direct supervision of CR, ICR, and PR services to include the presence of the supervising physician through two-way, audio/video telecommunications 135 In the CY 2023 OPPS/ASC final rule with comment period, we removed § 410.27(a)(1)(iv)(D) in its entirety and added its language regarding pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac rehabilitation services and the virtual presence of a physician through audio/video real-time communications technology during the PHE to the newly designated § 410.27(a)(1)(iv)(B)(1) (87 FR 72024). 136 Ibid. technology (exclu d the virtual presence of a physician through audio/video real-time communications technology during the PHE to the newly designated § 410.27(a)(1)(iv)(B)(1) (87 FR 72024). 136 Ibid. technology (excluding audio-only) until December 31, 2023 (87 FR 72019 and 72020). In the CY 2024 OPPS/ASC final rule with comment period, we finalized a policy to further revise § 410.27(a)(1)(iv)(B)(1) to continue to allow for the direct supervision requirement for CR, ICR, and PR services to include the virtual presence of the physician through audio-video real-time communications technology (excluding audio-only) through December 31, 2024 and to extend this policy to the nonphysician practitioners, that is NPs, PAs, and CNSs, who were eligible to supervise these services beginning in CY 2024 (88 FR 81863 through 81867). In the CY 2025 OPPS/ASC final rule with comment period, we finalized a policy to continue to allow for the direct supervision of CR, ICR, PR services to include the virtual presence of the physician (or other nonphysician practitioner) through audio-video real- time communications technology (excluding audio-only) through December 31, 2025 (89 FR 94280). b. Virtual Direct Supervisio the physician (or other nonphysician practitioner) through audio-video real- time communications technology (excluding audio-only) through December 31, 2025 (89 FR 94280). b. Virtual Direct Supervision of Diagnostic Services Furnished to Hospital Outpatients (42 CFR 410.28(e)(2)(iii)) In the April 6th, 2020 COVID–19 IFC, for consistency with the revisions made to 42 CFR 410.27(a)(1)(iv)(D) 137 described above and 410.32(b)(3)(ii) (revising the definition of direct supervision of diagnostic services furnished in a physician’s office to include virtual supervision for the duration of the PHE), we changed the regulation at 42 CFR 410.28(e) to provide that, during a PHE as defined in 42 CFR 400.200, the presence of the physician for purposes of the direct supervision requirement for diagnostic services includes virtual presence through audio/video real-time communications technology when use of such technology is indicated to reduce exposure risks for the beneficiary or health care provider (85 FR 19245 and 19246). To ensure consistency with additional revisions made to 42 CFR 410.27(a)(1)(iv)(B)(1) and 410.32(b)(3)(ii) extending the end date of the flexibility allowing for the virtual r (85 FR 19245 and 19246). To ensure consistency with additional revisions made to 42 CFR 410.27(a)(1)(iv)(B)(1) and 410.32(b)(3)(ii) extending the end date of the flexibility allowing for the virtual supervision of the services governed by those regulations, the CY 2023 OPPS final rule with comment period (87 FR 72024 through 72026), CY 2024 OPPS final rule with comment period (88 FR 81866 and 81867), and CY 2025 OPPS final rule with comment period (89 FR 94278 and 94280) subsequently extended the end date of the flexibility allowing for direct supervision to include the virtual supervision of outpatient diagnostic services through audio/video real-time communications technology (excluding audio-only) through December 31, 2025. 2. CY 2026 Virtual Direct Supervision of CR, ICR, PR Services and Diagnostic Services Furnished to Hospital Outpatients In the CY 2026 Physician Fee Schedule (PFS) proposed rule, published elsewhere in the Federal Register, we propose to revise the definition of direct supervision at § 410.26(a)(2) and § 410.32(b)(3)(ii) to make permanent the availability of virtual direct supervision of therapeutic and diagnostic services under the PFS, except for services f direct supervision at § 410.26(a)(2) and § 410.32(b)(3)(ii) to make permanent the availability of virtual direct supervision of therapeutic and diagnostic services under the PFS, except for services that have a global surgery indicator of 010 or 090. This information can be found in the PFS PPRVU public use file (https:// www.cms.gov/medicare/payment/fee- schedules/physician/pfs-relative-value- files). These global surgery indicators are defined in IOM Pub. 100–04, chapter 23, section 50.6 as 010 ‘‘Minor procedure with preoperative relative values on the day of the procedure and postoperative relative values during a 10-day postoperative period included in the fee schedule amount; evaluation and management services on the day of the procedure and during this 10-day postoperative period generally not payable’’ and 090 ‘‘Major surgery with a 1-day preoperative period and 90-day postoperative period included in the fee schedule payment amount’’ As explained in that rule, this proposal is made in response to overwhelming support and requests to extend this policy permanently for a wider set of services than the ones that were finalized in the CY 2025 PFS Final Rule and would build on s made in response to overwhelming support and requests to extend this policy permanently for a wider set of services than the ones that were finalized in the CY 2025 PFS Final Rule and would build on the incremental approach of making the virtual supervision of certain services permanent which we began in the CY 2025 PFS rule. As noted in the CY 2026 PFS proposed rule, this approach would recognize that virtual supervision has been available and widely utilized since the beginning of the PHE while excluding certain services to ensure quality of care and patient safety, and in particular, the ability of the supervising practitioner to intervene if complications arise, particularly in complex, high-risk instances where unexpected or adverse events may occur or for procedures that may be riskier or more intense since a patient’s clinical status can quickly change. For the complete discussion of the proposed revisions to § 410.26(a)(2) and § 410.32(b)(3)(ii), we refer readers to the VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00220 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 te Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00220 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 33695 CY 2026 PFS proposed rule published elsewhere in the Federal Register. In addition to desiring uniformity under the PFS and OPPS in how regulations are applied to similarly situated clinicians and providers, we agree that the approach proposed in the PFS proposed rule strikes the appropriate balance between recognizing that the virtual supervision of diagnostic services has been available and widely utilized since the beginning of the PHE and ensuring quality of care and patient safety. Consequently, we propose to revise § 410.27(a)(1)(iv)(B)(1) and § 410.28(e)(2)(iii) to make the availability of the direct supervision of CR, ICR, PR services and diagnostic services via audio-video real-time communications technology (excluding audio-only) permanent, except for diagnostic services that have a global surgery indicator of 010 or 090. We would like to note that permanently adopting a definition of direct supervision that uding audio-only) permanent, except for diagnostic services that have a global surgery indicator of 010 or 090. We would like to note that permanently adopting a definition of direct supervision that allows ‘‘immediate availability’’ of the supervising practitioner using audio/video real-time communications technology (excluding audio-only), for CR, ICR, PR and diagnostic services described under § 410.28, except for diagnostic services that have a global surgery indicator of 010 or 090 does not mean that it is appropriate to allow virtual presence for every service for every Medicare beneficiary in every clinical scenario. As always, the physician or nonphysician practitioner should use his or her complex professional judgment to determine the appropriate supervision modality on a case-by-case basis. D. Medical Review of Certain Inpatient Hospital Admissions Under Medicare Part A for CY 2026 and Subsequent Years 1. Background on the 2-Midnight Rule In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50944 through 50952), we clarified our policy regarding when an inpatient admission is considered reasonable and necessary for purposes of Medicare Part A payment. Under this policy, we est ule (78 FR 50944 through 50952), we clarified our policy regarding when an inpatient admission is considered reasonable and necessary for purposes of Medicare Part A payment. Under this policy, we established a benchmark providing that surgical procedures, diagnostic tests, and other treatments would be generally considered appropriate for payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights and admits the patient as an inpatient based upon that expectation. Conversely, when a beneficiary enters a hospital for a surgical procedure not designated as an inpatient-only (IPO) procedure as described in 42 CFR 419.22(n), a diagnostic test, or any other treatment, and the physician expects to keep the beneficiary in the hospital for only a limited period of time that does not cross 2 midnights, the services would be generally inappropriate for payment under Medicare Part A, regardless of the hour that the beneficiary came to the hospital or whether the beneficiary used a bed. With respect to services designated under the OPPS as IPO procedures, we explained that because of the intrinsic risks, recovery impacts, or complex the hospital or whether the beneficiary used a bed. With respect to services designated under the OPPS as IPO procedures, we explained that because of the intrinsic risks, recovery impacts, or complexities associated with such services, these procedures would continue to be appropriate for payment under Medicare Part A regardless of the expected length of stay. We also indicated that there might be further ‘‘rare and unusual’’ exceptions to the application of the benchmark, which would be detailed in subregulatory guidance. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50944 through 50952), we also finalized the 2-midnight presumption, which is related to the 2- midnight benchmark but is a separate medical review policy. The 2-midnight benchmark represents guidance to reviewers to identify when an inpatient admission is generally reasonable and necessary for purposes of Medicare Part A payment, while the 2-midnight presumption relates to instructions to medical reviewers regarding the selection of claims for medical review. Specifically, under the 2-midnight presumption, inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following th selection of claims for medical review. Specifically, under the 2-midnight presumption, inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order are presumed to be appropriate for Medicare Part A payment and are not the focus of medical review efforts, absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. We refer readers to the CY 2021 OPPS/ ASC final rule with comment period for additional discussion about the distinction between the 2-midnight presumption and benchmark (85 FR 86113 through 86114). In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70538 through 70545), we revisited the previous rare and unusual exceptions policy and finalized a proposal to allow for case-by-case exceptions to the 2- midnight benchmark, whereby Medicare Part A payment may be made for inpatient admissions where the admitting physician does not expect the patient to require hospital care spanning 2 midnights, if the documentation in the medical record supports the physician’s determination that the patient nonetheless requires inpatient hospita ect the patient to require hospital care spanning 2 midnights, if the documentation in the medical record supports the physician’s determination that the patient nonetheless requires inpatient hospital care. We stated that the following criteria would be relevant to determining whether an inpatient admission with an expected length of stay of less than 2 midnights is nonetheless appropriate for Medicare Part A payment: • Complex medical factors such as history and comorbidities; • The severity of signs and symptoms; • Current medical needs; and • The risk of an adverse event. In other words, for purposes of Medicare payment, an inpatient admission is payable under Part A if the documentation in the medical record supports either the admitting physician’s reasonable expectation that the patient will require hospital care spanning at least 2 midnights, or the physician’s determination based on factors such as those identified previously that the patient nonetheless requires care on an inpatient basis. The exceptions for procedures on the IPO list and for ‘‘rare and unusual’’ circumstances designated by CMS as national exceptions were unchanged by the CY 2016 OPPS/ASC final rule with patient basis. The exceptions for procedures on the IPO list and for ‘‘rare and unusual’’ circumstances designated by CMS as national exceptions were unchanged by the CY 2016 OPPS/ASC final rule with comment period. As we stated in the CY 2016 OPPS/ ASC final rule with comment period, the decision to formally admit a patient to the hospital is subject to medical review. Specifically, for inpatient admissions not related to a surgical procedure specified by Medicare as an IPO procedure under § 419.22(n) and for which there is not a national exception, payment of the claim under Medicare Part A is subject to the clinical judgment of the medical reviewer to determine whether the medical record supports a reasonable expectation of the need for hospital care crossing at least 2 midnights or otherwise supports a need for inpatient care. The medical reviewer’s clinical judgment involves the synthesis of all submitted medical record information (for example, progress notes, diagnostic findings, medications, nursing notes, and other supporting documentation) to make a medical review determination on whether the clinical requirements in the relevant policy have been met. In addition, Medicar , medications, nursing notes, and other supporting documentation) to make a medical review determination on whether the clinical requirements in the relevant policy have been met. In addition, Medicare review contractors must abide by CMS’ policies in making payment determinations. While Medicare review contractors may continue to use commercial screening tools to help evaluate the inpatient admission decision for purposes of payment under Medicare Part A, such tools are not binding on the hospital, CMS, or its review contractors. This type of information also may be VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00221 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 33696 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules appropriately considered by the physician as part of the complex medical judgment that guides his or her decision to keep a beneficiary in the hospital and formulation of the expected length of stay. 2. Current Policy for Medical Review of Inpatient Hospital Admissions for Procedures Removed From the Inpatient Only List In the CY 2020 OPPS/ASC final r nd formulation of the expected length of stay. 2. Current Policy for Medical Review of Inpatient Hospital Admissions for Procedures Removed From the Inpatient Only List In the CY 2020 OPPS/ASC final rule with comment period, we finalized a policy to exempt procedures that have been removed from the IPO list from certain medical review activities to assess compliance with the 2-midnight rule within the 2 calendar years following their removal from the IPO list. We stated that these procedures would be exempted from site-of-service claim denials under Medicare Part A, eligibility for Beneficiary and Family- Centered Care Quality Improvement Organizations (BFCC–QIOs) referrals to Recovery Audit Contractors (RACs) for noncompliance with the 2-midnight rule, and RAC reviews for ‘‘patient status’’ (that is, site-of-service). We explained that during this 2-year period, BFCC–QIOs would have the opportunity to review such claims in order to provide education for practitioners and providers regarding compliance with the 2-midnight rule, but claims identified as noncompliant would not be denied with respect to the site-of- service under Medicare Part A. For CY 2021, in conjunction with our p arding compliance with the 2-midnight rule, but claims identified as noncompliant would not be denied with respect to the site-of- service under Medicare Part A. For CY 2021, in conjunction with our proposal to eliminate the IPO list, we modified our proposal to continue the 2- year exemption, and instead finalized a policy under which procedures removed from the IPO list on or after January 1, 2021, would be indefinitely exempted from the above described medical review activities. We explained that the elimination of the IPO list was a large-scale change that created brand new considerations for providers regarding site-of-service determinations. We believed a change of this significance required us to reevaluate our stance on the exemption period for procedures removed from the IPO list, resulting in our decision to finalize an indefinite exemption period rather than continuing the previous 2-year exemption period. We stated that this exemption would last with respect to each procedure removed from the IPO list until we had Medicare claims data indicating that the procedure was more commonly performed in the outpatient setting than the inpatient setting. Thus, for the exemption t re removed from the IPO list until we had Medicare claims data indicating that the procedure was more commonly performed in the outpatient setting than the inpatient setting. Thus, for the exemption to end for a specific procedure, in a single calendar year we would need to have Medicare claims data indicating that the procedure was performed more than 50 percent of the time in the outpatient setting. We noted that the end of the exemption period for each procedure removed from the IPO list on or after January 1, 2021 would be announced via rulemaking. Consequently, in the CY 2021 OPPS/ ASC final rule with comment period, we amended 42 CFR 412.3(d)(2) to clarify when a procedure removed from the IPO list is exempt from the identified medical review activities. To account for the previous exemption policy that was in effect for CY 2020, we added § 412.3(d)(2)(i) which stated that for ‘‘those services and procedures removed between January 1 and December 31, 2020, this exemption will last for 2 years from the date of such removal.’’ To implement the change to an indefinite exemption period that we finalized in CY 2021, we added § 412.3(d)(2)(ii) which stated that for ‘‘those services t for 2 years from the date of such removal.’’ To implement the change to an indefinite exemption period that we finalized in CY 2021, we added § 412.3(d)(2)(ii) which stated that for ‘‘those services and procedures removed on or after January 1, 2021, this exemption will last until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting.’’ In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63736 through 63740), given our decision in that rule to halt the elimination of the IPO list, and the fact that we were accordingly no longer removing an unprecedented number of procedures from the list at one time, we proposed to return to the 2-year exemption period from the specified medical review activities for procedures removed from the IPO list. Under the circumstances of that final rule with comment period, we believed that a 2-year exemption period was adequate to enable providers to gain experience with the application of the 2- midnight rule to those procedures that have been newly removed from the IPO list. We also stated that we believed that a 2-year exemption from the medical review activities was also sufficient tim 2- midnight rule to those procedures that have been newly removed from the IPO list. We also stated that we believed that a 2-year exemption from the medical review activities was also sufficient time for providers and BFCC–QIOs to understand the documentation necessary to support Part A payment for those patients for which the admitting physician determines that the procedures should be furnished in an inpatient setting. In the preamble to the CY 2022 OPPS/ ASC final rule with comment period (86 FR 63739), we stated that we were amending § 412.3(d)(2) to clarify ‘‘that for all services and procedures removed after January 1, 2020, this exemption would last for 2 years from the date of such removal. This would include those services and procedures removed on or after January 1, 2021, for which this exemption would also be for 2 years from the date of such removal.’’ Accordingly, § 412.3(d)(2)(i) was revised to read ‘‘for those services and procedures removed on or after January 1, 2020, the exemption in this paragraph (d)(2) will last for 2 years from the date of such removal.’’ However, due to a drafting oversight, we failed to correspondingly remove § 412.3(d)(2)(ii): ‘‘For thos 0, the exemption in this paragraph (d)(2) will last for 2 years from the date of such removal.’’ However, due to a drafting oversight, we failed to correspondingly remove § 412.3(d)(2)(ii): ‘‘For those services and procedures removed on or after January 1, 2021, the exemption in this paragraph (d)(2) will last until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting.’’ As a result of this error, the exemption period was not changed to two years as we intended and instead remained the indefinite exemption period that was finalized in the CY 2021 OPPS/ASC final rule with comment period. 3. Medical Review of Inpatient Hospital Admissions for Procedures Removed From the Inpatient Only List for CY 2026 and Subsequent Years As stated earlier in this section, services on the IPO list are not subject to the 2-midnight rule for purposes of determining whether payment is appropriate under Medicare Part A. However, the 2-midnight rule is applicable once services have been removed from the IPO list. Outside of the exemption periods discussed above, services that have been removed from the IPO list are currently subject to initial medical plicable once services have been removed from the IPO list. Outside of the exemption periods discussed above, services that have been removed from the IPO list are currently subject to initial medical reviews of claims for short-stay inpatient admissions conducted by BFCC–QIOs. BFCC–QIOs may also refer providers to the RACs for further medical review due to exhibiting persistent noncompliance with Medicare payment policies, including, but not limited to: • Having high denial rates; • Consistently failing to adhere to the 2-midnight rule; or • Failing to improve their performance after QIO educational intervention. However, as finalized in the CY 2021 OPPS/ASC final rule with comment period, procedures that have been removed from the IPO list on January 1, 2021 or later were indefinitely exempted from site-of-service claim denials under Medicare Part A, eligibility for BFCC–QIO referrals to RACs for noncompliance with the 2- midnight rule, and RAC reviews for ‘‘patient status’’ (that is, site-of-service). We stated that this exemption would last for each procedure until we have Medicare claims data indicating that the procedure is more commonly performed in the outpatient setting th , site-of-service). We stated that this exemption would last for each procedure until we have Medicare claims data indicating that the procedure is more commonly performed in the outpatient setting than the inpatient setting. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00222 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 33697 As stated in section IX., we propose to eliminate the IPO list in CY 2026 with a transitional period of 3 years. For CY 2026, we propose to remove all musculoskeletal procedures from the IPO list. Prior to the CY 2020 exemption for services removed from the IPO list, the elimination of the IPO list would have meant that procedures currently on the IPO list would be subject to the 2- midnight rule (both the 2-midnight benchmark and 2-midnight presumption) upon removal from the IPO list. We believe that with the proposed elimination of the IPO list, the 2- midnight benchmark remains an important metric to help guide when Part A payment for inpatient hospital admissions is appropriate. As techno that with the proposed elimination of the IPO list, the 2- midnight benchmark remains an important metric to help guide when Part A payment for inpatient hospital admissions is appropriate. As technology advances and more services may be safely performed in the hospital outpatient setting and paid under the OPPS, it is increasingly important for physicians to exercise their clinical judgment in determining the appropriate clinical setting for their patient to receive a procedure, whether that be as an inpatient or on an outpatient basis. Importantly, removal of a service from the IPO list has never meant that a beneficiary cannot receive the service as a hospital inpatient—as always, the physician should use his or her complex medical judgment to determine the appropriate setting on a case-by-case basis. As finalized in the CY 2021 OPPS/ ASC final rule with comment period, procedures removed from the IPO list after January 1, 2021, were indefinitely exempted from site-of-service claim denials under Medicare Part A, eligibility for BFCC–QIO referrals to RACs for noncompliance with the 2- midnight rule, and RAC reviews for ‘‘patient status’’ (that is, site-of-service). These procedu denials under Medicare Part A, eligibility for BFCC–QIO referrals to RACs for noncompliance with the 2- midnight rule, and RAC reviews for ‘‘patient status’’ (that is, site-of-service). These procedures are not considered by the BFCC–QIOs in determining whether a provider exhibits persistent noncompliance with the 2-midnight rule for purposes of referral to the RAC nor will claims for these procedures be reviewed by RACs for ‘‘patient status.’’ During the exemption period, BFCC– QIOs have the opportunity to review such claims in order to provide education for practitioners and providers regarding compliance with the 2-midnight rule, but claims identified as noncompliant are not denied with respect to the site-of-service under Medicare Part A. Again, information gathered by the BFCC–QIO when reviewing procedures as they are newly removed from the IPO list can be used for educational purposes but will not result in a claim denial during the exemption period. When we previously finalized elimination of the IPO list in the CY 2021 OPPS/ASC final rule with comment period, we received numerous comments that suggested a longer exemption period would be appropriate, due to the unprecedent elimination of the IPO list in the CY 2021 OPPS/ASC final rule with comment period, we received numerous comments that suggested a longer exemption period would be appropriate, due to the unprecedented volume of procedures becoming subject to the 2- midnight rule. Therefore, we finalized an indefinite exemption period for procedures removed from the IPO list during the 3-year transition from the list to allow providers to become more familiar with how to comply with the 2- midnight rule and with the availability of payment under both the hospital inpatient and outpatient payment systems for procedures removed from the IPO list. Our current proposal to eliminate the IPO list over a 3-year period warrants similar considerations. Accordingly, we propose to maintain the indefinite exemption period under 42 CFR 412.3(d)(2)(ii) for procedures that are removed from the IPO list that is currently in effect. In the interest of clarity, we propose to delete § 412.3(d)(2)(i) and (ii) and revise § 412.3(d)(2) to read ‘‘An inpatient admission for a surgical procedure specified by Medicare as inpatient only under § 419.22(n) of this chapter is generally appropriate for payment under Medicare Pa § 412.3(d)(2) to read ‘‘An inpatient admission for a surgical procedure specified by Medicare as inpatient only under § 419.22(n) of this chapter is generally appropriate for payment under Medicare Part A regardless of the expected duration of care. Procedures no longer specified as inpatient only under § 419.22(n) of this chapter are appropriate for payment under Medicare Part A in accordance with paragraph (d)(1) or (3) of this section. Claims for services and procedures removed from the inpatient only list under § 419.22 of this chapter on or after January 1, 2021 are exempt from certain medical review activities until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting.’’ As indicated in the CY 2021 OPPS/ASC final rule with comment period, the determination of the Secretary that a service or procedure is more commonly performed in the outpatient setting is based on claims data that demonstrates that the service or procedure is being performed more than 50 percent of the time in the outpatient setting in a single calendar year (85 FR 86117 and 86119). We note that this would be an exemption from certain medical review activ being performed more than 50 percent of the time in the outpatient setting in a single calendar year (85 FR 86117 and 86119). We note that this would be an exemption from certain medical review activities, not an exception to the 2- midnight rule. Providers are still required to comply with the 2-midnight rule during the exemption period, and CMS or its contractors may still conduct patient status medical review in cases in which there is evidence of systemic fraud or abuse occurring. Additionally, we note that other types of medical review, unrelated to patient status, would not be impacted by the proposed exemption. We will announce in subregulatory guidance when the exemption is ending for a particular service or procedure prior to the effective date of the end of the exemption for the particular service or procedure. We invite commenters to indicate whether and why they believe an indefinite exemption period, or another time period, would be most appropriate. In summary, for CY 2026 and subsequent years, we propose to continue the indefinite exemption from site-of-service claim denials, initial medical review contractor 138 referrals to RACs, and RAC reviews for ‘‘patient stat 26 and subsequent years, we propose to continue the indefinite exemption from site-of-service claim denials, initial medical review contractor 138 referrals to RACs, and RAC reviews for ‘‘patient status’’ (that is, site-of-service) finalized in the CY 2021 OPPS/ASC final rule with comment period for procedures that are removed from the IPO list in CY 2021 or later under the OPPS. We also propose to remove § 412.3(d)(2)(i) and (ii) and revise § 412.3(d)(2) to clarify that claims for services and procedures removed from the IPO list on or after January 1, 2021 are exempt from certain medical review activities until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting than the inpatient setting. Finally, we are seeking comment on whether other exemption periods may be warranted. E. Coding and Payment for Category B IDE Devices and Studies We propose to revise the section heading and paragraph (a) introductory text at § 419.47 to correct two errors that occurred when this regulation was revised in the CY 2025 OPPS/ASC final rule with comment period (89 FR 94304 through 94307). In the CY 2025 OPPS/ASC final rule with comment period, ct two errors that occurred when this regulation was revised in the CY 2025 OPPS/ASC final rule with comment period (89 FR 94304 through 94307). In the CY 2025 OPPS/ASC final rule with comment period, we finalized our proposal to codify our coding and payment policy for Category B Investigational Device Exemption (IDE) clinical trials with control arms through revisions to § 419.47. Specifically, we revised § 419.47’s paragraph (a) introductory text to specify that our policy only applies to IDE studies with a placebo control arm and where a payment adjustment is necessary to preserve the scientific validity of such a study. However, in making these revisions, we inadvertently deleted 138 On May 22, 2025, CMS announced that responsibility for short-stay reviews will be transitioned from the BFCC–QIOs to the MACs, as of September 1, 2025. https://www.cms.gov/data- research/monitoring-programs/medicare-fee- service-compliance-programs/medical-review-and- education/hospital-patient-status-reviews. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00223 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 33 -reviews. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00223 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 33698 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules existing regulatory text that was not changed in the CY 2025 OPPS/ASC final rule with comment period. Specifically, we inadvertently deleted § 419.47(a)(1) ‘‘The Medicare coverage IDE study criteria in § 405.212 of this chapter are met’’ and paragraph (2) ‘‘A new or revised code is necessary to preserve the scientific validity of such a study, such as by preventing the unblinding of the study.’’ Therefore, effective January 1, 2026, we propose to amend the regulatory text at § 419.47(a) to restore these two inadvertently removed paragraphs. Additionally, in the CY 2025 OPPS/ ASC final rule with comment period, we decided not to finalize our CY 2025 OPPS/ASC proposal to extend our coding and payment policy to drugs and devices that are being studied in clinical trials under a Coverage with Evidence Development (CED) National Coverage Determination (NCD) 139 for which the trial includes a treatment and con drugs and devices that are being studied in clinical trials under a Coverage with Evidence Development (CED) National Coverage Determination (NCD) 139 for which the trial includes a treatment and control arm for CY 2025. However, despite our intent to remove all proposed revisions relating to this extension of the policy in the final rule, we inadvertently revised the section heading at § 419.47 to state that the policy applied to ‘‘devices/drugs studies.’’ Since we did not finalize the policy for CY 2025, we propose, effective January 1, 2026, to delete ‘‘and devices/drugs studies’’ from the section heading at § 419.47. XI. Proposed CY 2026 OPPS Payment Status and Comment Indicators A. Proposed CY 2026 OPPS Payment Status Indicator Definitions Payment status indicators (SIs) that we assign to HCPCS codes and APCs serve an important role in determining payment for services under the OPPS. They indicate whether a service represented by a HCPCS code is payable under the OPPS or another payment system and whether particular OPPS policies apply to the code. For CY 2026 and subsequent years, we propose to create a new status indicator ‘‘S1’’. We propose this new status indicator to ind payment system and whether particular OPPS policies apply to the code. For CY 2026 and subsequent years, we propose to create a new status indicator ‘‘S1’’. We propose this new status indicator 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. This policy is further discussed in section V.B.10. of this proposed rule. The proposed definition and payment status of proposed status indicator ‘‘S1’’ can be found in Table 72. We are not proposing to make any additional changes to the existing definitions of status indicators that were listed in Addendum D1 to the CY 2025 OPPS/ASC final rule with comment period, which is available on the CMS website at https://www.cms.gov/ medicare/payment/prospective- payment-systems/hospital-outpatient/ regulations-notices. The complete list of proposed CY 2026 payment status indicators and their definitions is displayed in Addendum D1 to this proposed rule, which is available on the CMS website at https://www.cms.gov/medicare/ payment/prospective-payment-systems/ hospital-outp ators and their definitions is displayed in Addendum D1 to this proposed rule, which is available on the CMS website at https://www.cms.gov/medicare/ payment/prospective-payment-systems/ hospital-outpatient/regulations-notices. The proposed CY 2026 payment status indicator assignments for APCs and HCPCS codes are shown in Addendum A and Addendum B, respectively, to this proposed rule, which are available on the CMS website at https:// www.cms.gov/medicare/payment/ prospective-payment-systems/hospital- outpatient/regulations-notices. We solicit public comments on the proposed definitions of the OPPS payment status indicators for CY 2026. 139 https://www.cms.gov/medicare/coverage/ evidence. B. Proposed CY 2026 Comment Indicator Definitions We propose to use four comment indicators for the CY 2026 OPPS. These comment indicators, ‘‘CH,’’ ‘‘NC,’’ ‘‘NI,’’ and ‘‘NP,’’ are in effect for CY 2025; and we propose to continue their use in CY 2026. The proposed CY 2026 OPPS comment indicators are as follows: • ‘‘CH’’—Active HCPCS code in current and next calendar year, status indicator and/or APC assignment has changed; or active HCPCS code that will be discontinued at the end of the current ca s follows: • ‘‘CH’’—Active HCPCS code in current and next calendar year, status indicator and/or APC assignment has changed; or active HCPCS code that will be discontinued at the end of the current calendar year. • ‘‘NC’’—New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year, as compared to current calendar year for which we requested comments in the proposed rule; final APC assignment; comments will not be accepted on the final APC assignment for the new code. • ‘‘NI’’—New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year, as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code. • ‘‘NP’’—New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year, as compared to current calendar year, proposed APC assignment; comments will be accepted on the proposed APC assignment for the new code. The definitions of the proposed OPPS comment indicators for CY 2026 are listed in Addendum D2 to this proposed PC assignment; comments will be accepted on the proposed APC assignment for the new code. The definitions of the proposed OPPS comment indicators for CY 2026 are listed in Addendum D2 to this proposed rule, which is available on the CMS website at https://www.cms.gov/ medicare/payment/prospective- payment-systems/hospital-outpatient/ regulations-notices. We solicit public comments on our proposed definitions of the OPPS comment indicators for CY 2026. XII. MedPAC Recommendations The Medicare Payment Advisory Commission (MedPAC) was established under section 1805 of the Act in large part to advise the U.S. Congress on issues affecting the Medicare program. As required under the statute, MedPAC submits reports to the Congress no later than March and June of each year that VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00224 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 00225 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 33700 Federal Register / Vol. 90, No. 135 / T 25 Jkt 265001 PO 00000 Frm 00225 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 33700 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules technologies, services, and procedures; and • Level II HCPCS codes (also known as alpha-numeric codes), which are used primarily to identify drugs, devices, supplies, temporary procedures, and services not described by CPT codes. We finalized a policy in the August 2, 2007 final rule (72 FR 42533 through 42535) to evaluate each year all new and revised Category I and Category III CPT codes and Level II HCPCS codes that describe surgical procedures, and to make preliminary determinations during the annual OPPS/ASC rulemaking process regarding whether or not they meet the criteria for payment in the ASC setting as covered surgical procedures and, if so, whether or not they are office-based procedures. In addition, we identify new and revised codes as ASC covered ancillary services based upon the final payment policies of the revised ASC payment system. In prior rulemakings, we refer to this process as recognizing new codes. However, this process ha SC covered ancillary services based upon the final payment policies of the revised ASC payment system. In prior rulemakings, we refer to this process as recognizing new codes. However, this process has always involved the recognition of new and revised codes. We consider revised codes to be new when they have substantial revision to their code descriptors that necessitate a change in the current ASC payment indicator. To clarify, we refer to these codes as new and revised in this CY 2026 OPPS/ASC proposed rule. We have separated our discussion below based on when the codes are released and whether we propose to solicit public comments in the proposed rule (and respond to those comments in the CY 2026 OPPS/ASC final rule with comment period) or whether we will be soliciting public comments in the CY 2026 OPPS/ASC final rule with comment period (and responding to those comments in the CY 2027 OPPS/ ASC final rule with comment period). 2. April 2025 HCPCS Codes Proposed Rule Comment Solicitation For the April 2025 update, there were no new CPT codes; however, there were several new Level II HCPCS codes. In the April 2025 ASC quarterly update (Transmittal 13152, dated April 10, 2025, C itation For the April 2025 update, there were no new CPT codes; however, there were several new Level II HCPCS codes. In the April 2025 ASC quarterly update (Transmittal 13152, dated April 10, 2025, CR 14017), we added several new Level II HCPCS codes to the list of covered ancillary services. Table 73 (New Level II HCPCS Codes for ASC Covered Surgical Procedures and Ancillary Services Effective April 1, 2025) of this proposed rule lists the new Level II HCPCS codes that were implemented April 1, 2025. The proposed comment indicators, payment indicators and payment rates, where applicable, for these April codes can be found in Addendum BB to this proposed rule. The list of ASC payment indicators and corresponding definitions can be found in Addendum DD1 to this proposed rule. These new codes that are effective April 1, 2025 are assigned to comment indicator ‘‘NP’’ in Addendum BB to this proposed rule to indicate that the codes are assigned to an interim APC assignment and that comments will be accepted on their interim APC assignments. The list of comment indicators and definitions used under the ASC payment system can be found in Addendum DD2 to this proposed rule. We note that th will be accepted on their interim APC assignments. The list of comment indicators and definitions used under the ASC payment system can be found in Addendum DD2 to this proposed rule. We note that the following ASC addenda and OPPS Addendum O are available via the internet on the CMS website. • ASC Addendum AA: Proposed ASC Covered Surgical Procedures for CY 2026 (Including Surgical Procedures for Which Payment is Packaged), • ASC Addendum BB: Proposed ASC Covered Ancillary Services Integral to Covered Surgical Procedures for CY 2026 (Including Ancillary Services for Which Payment is Packaged), • ASC Addendum DD1: Proposed ASC Payment Indicators (PI) for CY 2026, • ASC Addendum DD2: Proposed ASC Comment Indicators (CI) for CY 2026, • ASC Addendum EE: Proposed Surgical Procedures to be Excluded from Payment in ASC for CY 2026, and • ASC Addendum FF: Proposed ASC Device Offset Percentages for CY 2026, • Addendum O: Long Descriptors for New Category I CPT Codes, Category III CPT Codes, C-codes, and G-Codes Effective January 1, 2026. We invite public comments on the proposed payment indicators for the new HCPCS codes that were recognized as ASC covered ancillary services in April 2025