Medicare and Medicaid Programs; CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; and Medicare Prescription Drug Inflation Rebate Program

Section 1848(c)(2)(B)(ii)(II) of the Act requires that increases or decreases in RVUs may not cause the amount of Medicare Part B expenditures for the year to differ by more than $20 million from what expenditures would have been in the absence of these changes. If this threshold is exceeded, we make adjustments to preserve budget neutrality.

Our estimates of changes in Medicare expenditures for PFS services compare payment rates for CY 2025 with payment rates for CY 2026 using CY 2024 Medicare utilization. The payment impacts described in this rule reflect averages by specialty based on Medicare utilization. The payment impact for an individual practitioner could vary from the average and will depend on the mix of services they furnish. The average percentage change in total revenues will be less than the impact displayed here because practitioners and other entities generally furnish services to both Medicare and non-Medicare patients. In addition, practitioners and other entities may receive substantial Medicare revenues for services under other Medicare payment systems. For instance, independent laboratories receive approximately 83 percent of their Medicare revenues from clinical diagnostic laboratory tests that are paid under the Clinical Laboratory Fee Schedule (CLFS).

As required by section 1848(d)(1)(A) of the Act, beginning in CY 2026, there will be two separate conversion factors (CFs): one for items and services furnished by a qualifying APM participant as defined in section 1833(z)(2) of the Act (referred to as the qualifying APM conversion factor) and another for other items and services (referred to as the nonqualifying APM conversion factor), equal to the respective conversion factor for the previous year (or, for CY 2026, equal to the single conversion factor for CY 2025) multiplied by the update established under section 1848(d)(20) of the Act for such respective conversion factor for such year. As specified by section 1848(d)(20) of the Act, the update to the qualifying APM conversion factor for CY 2026 is 0.75 percent while the update to the nonqualifying APM conversion factor for CY 2026 is 0.25 percent. To calculate the estimated CY 2026 PFS conversion

factors, we took the CY 2025 conversion factor and multiplied it by the budget neutrality adjustment required as described in the preceding paragraphs, then multiplied by the qualifying APM and nonqualifying APM updates specified by section 1848(d)(20) of the Act, then applied the 1-year increase of 2.50 percent for CY 2026 established by statute. We estimate the CY 2026 PFS qualifying APM CF to be $33.5675 which reflects a 0.49 percent positive budget neutrality adjustment required under section 1848(c)(2)(B)(ii)(II) of the Act and the 0.75 percent update adjustment factor specified under section 1848(d)(20) of the Act. We estimate the CY 2026 PFS nonqualifying APM CF to be $33.4009 which reflects a 0.49 percent positive budget neutrality adjustment required under section 1848(c)(2)(B)(ii)(II) of the Act and the 0.25 percent update adjustment factor specified under section 1848(d)(20) of the Act. We estimate the CY 2026 anesthesia qualifying APM CF to be 20.5998 and the CY 2026 anesthesia nonqualifying APM CF to be 20.4976, reflecting the same overall PFS adjustments with the addition of anesthesia-specific PE and MP adjustments. [GRAPHIC] [TIFF OMITTED] TR05NO25.170

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Table D-B7 shows the impact on PFS payment for physicians' services based on the proposed policies included in this rule. To the extent that there are year-to-year changes in the volume and mix of services provided by practitioners, the actual impact on total Medicare revenues will be different from those shown in Table D-B7 (CY 2026 PFS Estimated Impact on Total Allowed Charges by Specialty).

In recent years, we have received requests from interested parties to provide more granular information that separates the specialty- specific impacts by site of service. These interested parties have presented us with high-level information suggesting that Medicare payment policies are directly responsible for consolidating privately owned physician practices and freestanding supplier facilities into larger health systems. Their concerns highlight a need to update the information under the PFS to account for current trends in healthcare delivery, especially concerning independent versus facility-based practices. We published an RFI in the CY 2023 PFS proposed rule to gather feedback on this issue and refer readers to the discussion in the CY 2023 PFS final rule (87 FR 69429 through 69438). As part of our holistic review of how best to update our data and offer interested parties additional information that addresses some of the concerns raised, we have recently improved our current suite of public use files (PUFs) by including a new file that shows estimated specialty payment impacts at a more granular level, specifically by showing ranges of impact for practitioners within a specialty. This file is available on the CMS website under downloads for the CY 2026 PFS proposed rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

Some of the proposed policies in this rule are estimated to have significant differential effects depending on the site of service, especially the proposed changes to the allocation of indirect PE in the facility setting. Therefore, we published the impact tables including a facility/non-facility breakout of payment changes, as we believed that displaying the total impact by specialty alone, without the setting of care context, could be misleading for interested parties. The following is an explanation of the information represented in Table D-B7.

Column A (Specialty): Identifies the specialty for which data are shown.

Column B (Setting): Identifies the facility or non- facility setting for which data are shown.

Column C (Allowed Charges): The aggregate estimated PFS allowed charges for the specialty based on CY 2024 utilization and CY 2025 rates. That is, allowed charges are the PFS amounts for covered services and include coinsurance and deductibles (which are the financial responsibility of the beneficiary). These amounts have been summed across all services furnished by physicians, practitioners, and suppliers within a specialty to arrive at the total allowed charges for the specialty.

Column D (Impact of Work RVU Changes): This column shows the estimated CY 2026 impact on total allowed charges of the changes in the work RVUs, including the impact of changes due to potentially misvalued codes.

Column E (Impact of PE RVU Changes): This column shows the estimated CY 2026 impact on total allowed charges of the changes in the PE RVUs.

Column F (Impact of MP RVU Changes): This column shows the estimated CY 2026 impact on total allowed charges of the changes in the MP RVUs.

Column G (Combined Impact): This column shows the estimated CY 2026 combined impact on total allowed charges of all the changes in the previous columns. Column G may not equal the sum of columns D, E, and F due to rounding.

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The most widespread specialty-level impacts of the RVU changes are generally related to the changes to RVUs for specific services resulting from the misvalued code initiative, including RVUs for new and revised codes. The estimated impacts for most specialties in the office-based setting, including surgical specialties, primary care specialties, behavioral health specialties, and those who furnish highly technical services outside of the hospital setting reflect significant increases relative to most of those same specialties in the facility setting. These increases can largely be attributed to, the proposed adjustment to indirect PE allocation in the facility setting. To a lesser degree, projected increases for some specialties, especially in primary care and behavioral health are driven by the redistributive effects of the proposed efficiency adjustment to work RVUs and the third year of the behavioral health work update. Increases are also due to proposed increases in valuation for particular services after considering the recommendations from the American Medical Association's (AMA) Relative Value Scale Update Committee (RUC) and CMS review, and increased payments resulting from supply and equipment pricing updates. For independent laboratories, it is important to note that these entities receive approximately 83 percent of their Medicare revenues from services that are paid under the Clinical Lab Fee Schedule. Therefore, the estimated 1 percent increase for CY 2026 is only applicable to approximately 17 percent of the Medicare payment to these entities.

The estimated impacts for specialties in the hospital-based setting are driven primarily by the proposed adjustment to indirect PE allocation in the facility setting and the proposed efficiency adjustment. These decreases are also due to the revaluation of individual procedures based on reviews, including consideration of AMA RUC review and recommendations, as well as decreases resulting from the continued phase-in implementation of the previously finalized supply and equipment pricing updates. The estimated impacts also reflect decreased payments due to continued implementation of previously finalized code-level reductions that are being phased in over several years.

We note that several specialties appear on the specialty impacts table with both the largest projected increases in payment as well as the largest projected decreases in payment, split across the site of service differential.

We often receive comments regarding the changes in RVUs displayed on the specialty impact table (Table D-B7), including comments received in response to the valuations. We remind interested parties that although the estimated impacts are displayed at the specialty level, typically, the changes are driven by the valuation of a relatively small number of new and/or potentially misvalued codes. The percentage changes in Table D-B7 are based upon aggregate estimated PFS allowed charges summed across all services furnished by physicians, practitioners, and suppliers within a specialty to arrive at the total allowed charges for the specialty and compared to the same summed total from the previous calendar year. Therefore, they are averages and may not necessarily represent what is happening to the particular services furnished by a single practitioner within any given specialty.

As previously discussed, we have reviewed our suite of public use files and have worked on new ways to offer interested parties' additional information that addresses concerns about the lack of granularity in our impact tables. To illustrate how impacts can vary within specialties, we created a public use file that models the expected percentage change in total RVUs per practitioner. Using CY 2024 utilization data, Total RVUs change between -2 percent and 2 percent for roughly 25 percent of practitioners, representing approximately 32 percent of the changes in Total RVUs for all practitioners, with variation by

specialty. We also note the code level RVU changes are available in the Addendum B public use file that we make available with each rule (see https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/addendum-a-b-updates).

The specialty impacts displayed in Table D-B7 reflect changes within the pool of total RVUs. The specialty impacts table, therefore, includes any changes in spending that result from proposed policies that are subject to the statutory budget neutrality requirement at section 1848(c)(2)(B)(ii)(II) of the Act (such as the proposed the specialty impacts displayed in Table D-B7 reflect changes within the pool of total RVUs. The specialty impacts table, therefore, includes any changes in spending that result from proposed policies that are subject to the statutory budget neutrality requirement at section 1848(c)(2)(B)(ii)(II) of the Act (such as the proposed efficient adjustment or the proposed changes to indirect PE allocation in the facility setting) but does not include any changes in spending which result from proposed policies that are not subject to the statutory budget neutrality adjustment, and therefore, have a neutral impact across all specialties. The 0.75 percent and 0.25 percent updates to the CY 2026 qualifying APM and APM and nonqualifying APM conversion factors, respectively, as well as the single year increase of 2.50 percent to the conversion factor for CY 2026, are statutory changes that take place outside of BN, and therefore, are not captured in the specialty impacts displayed in Table D-B7. b. Impact

Column G of Table D-B7 displays the estimated CY 2025 impact on total allowed charges, by specialty, of all the RVU changes. A table showing the estimated impact of all of the changes on total payments for selected high-volume procedures is available under “downloads” on the CY 2026 PFS proposed rule website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/. We selected these procedures for the sake of illustration from among the procedures most commonly furnished by a broad spectrum of specialties. The change in both facility rates and non-facility rates are shown. For an explanation of facility and non-facility PE, we refer readers to Addendum A on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/. c. Estimated Impacts Related to the Proposed Efficiency Adjustment

In section II.E.2.b of this final rule, we finalized the application of an efficiency adjustment to the work RVU and corresponding intraservice portion of physician time for non-time-based services as we expect these kinds of services to accrue efficiencies over time. This applies to all codes except time-based codes, including but not limited to, E/M services, care management services, behavioral health services, services on the CMS telehealth list, and maternity codes with a global period of MMM, as well as new services. This efficiency adjustment policy will apply to all codes that are not otherwise excluded. Included code families represent the procedures, diagnostic tests, and radiology services that CMS expects to accrue efficiencies over time as changes in medical practice occur, including changes in clinician expertise, workflows, and technology.

The finalized efficiency adjustment for CY 2026 is calculated as the sum of the productivity adjustments used in the Medicare Economic Index (MEI) for the prior 5 years (2021 through 2025). The MEI is a measure of input price inflation faced by physicians and practitioners furnishing physicians' services such as physician's own time, non- physician employees' compensation, office rent, medical equipment, and more. The MEI productivity adjustment reflects the most recent historical estimate of the 10-year moving average growth of private nonfarm business total factor productivity, as calculated by the Bureau of Labor Statistics. Every year, the productivity adjustment is calculated by the CMS Office of the Actuary (OACT) based on the most recent historical data published by BLS at the time of the PFS final rule. Beginning in CY 2026, we are finalizing a 5-year look-back period to calculate the initial efficiency adjustment. See section II.E.2.b of this rule for more information on the proposed methodology. This calculation results in a proposed efficiency adjustment of 2.5 percent for CY 2026.

Generally, specialties that bill more often for timed codes, such as family practice, clinical psychologists, clinical social workers, geriatrics, and psychiatry would likely see an increase in RVUs; while specialties that bill more often for procedures, diagnostic imaging, and radiology services (such as radiation oncology, radiology, and some surgical specialties), would likely see a decrease in RVUs. This efficiency adjustment will decrease the work RVU for many services across most specialty types to reflect the efficiency gains that have taken place over time. Since this adjustment will reduce the work RVU for affected services, we project that there will be a net increase to the conversion factor as required under our budget neutrality provisions. We estimate that almost all specialties will experience no more than +1 or -1 percent change in RVUs as a result of this proposed policy, although the effect on individual services may be greater.

As stated in section II.E.2.b of this final rule, we finalized the proposed efficiency adjustment of 2.5 percent, and exempted additional codes, specifically time-based codes, services on the CMS telehealth list, and new codes for CY 2026, as reflected in the Codes Subject to Efficiency Adjustment public use file. This file can be found in the public use files for CY 2026; the file is available on the CMS website under downloads for the CY 2026 PFS final rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html. d. Estimated Impacts Related to the Proposed Site of Service Payment Differential

In section II.B. of this final rule, we proposed to, for each service valued in the facility setting, reduce the portion of the facility PE RVUs allocated based on work RVUs to half the amount allocated to non-facility PE RVUs for CY 2026.

Overall, specialties that practice primarily in the non-facility setting will see an increase in PE RVUs as a result of this redistribution. Specialties that perform services primarily in the facility setting will see a decrease in PE RVUs as a result of the proposed reduction to facility indirect PE. Overall, this proposed methodology change to indirect PE allocation will not affect the conversion factor, as all changes in valuation will be contained within the development of PE RVUs and redistribute PE RVUs from the facility to the non-facility setting.

We are finalizing as proposed the addition of several codes to the Medicare Telehealth Services List, including HCPCS codes G0473 and G0545, and CPT codes 90849, 92622, and 92623. We are not finalizing as proposed, the removal of HCPCS code G0136 from the Medicare Telehealth Services List. We are finalizing certain telecommunications technology- related flexibilities, including that we will continue to use a definition of direct supervision that allows “immediate

availability” of the supervising practitioner using real-time audio and video interactive telecommunications for services without a 010 or 090 global period indicator. We are finalizing as proposed, eliminating the telehealth frequency limitations for subsequent nursing facility and inpatient hospital visits. While we noted that certain other Medicare telehealth flexibilities related to the Public Health Emergency (PHE) for the Coronavirus Disease 2019 (COVID-19) (PHE for COVID-19) are expiring, including the removal of statutory geographic and location limitations for most Medicare telehealth services, the beneficiary's home continues to be a permissible originating site for certain types of services including those furnished for the diagnosis, evaluation, or treatment of a mental health disorder, including a Substance Use Disorder (SUD), and for monthly End Stage Renal Disease (ESRD) related clinical assessments described in section 1881(b)(3)(B) of the Act. However, expiration of certain flexibilities for Medicare telehealth services is not expected to impact broader utilization of these services because reasonable and necessary services for the diagnosis or treatment of an illness or injury continue to be covered. Despite the fact that some services will no longer be furnished under telehealth, we expect that they will continue to be furnished in- person. Therefore, we anticipate that our provisions will result in continued utilization of services that can be furnished as Medicare telehealth services during CY 2026 at levels comparable to observed utilization of these services during CY 2025.

1. Impact of Changes Related to Medicare Part B Payment for Skin Substitutes When Used During a Covered Application Procedure Under the PFS in the Non-Facility Setting

As discussed in detail in section II.K.D. of this final rule, starting January 1, 2026, we are finalizing to pay for the provision of certain groups of skin substitute products used during a covered application procedure (CPT codes 15271 through 15278) as supplies. These skin substitutes will be paid as incident-to supplies under the PFS in the non-facility setting in accordance with section 1861(s)(2)(A) of the Act. While costs associated with supplies are usually bundled into the PE RVUs for particular services in non- facility settings, these products have been paid separately for many years in the non-facility setting, where the majority of these products are currently used.

As discussed in detail in section II.K. of this final rule, in light of our careful review of the applicable statutory provisions governing products paid under the ASP methodology under 1847A of the Act, the different FDA regulatory frameworks used for these products, and the skyrocketing increase in Medicare spending for such products, we proposed to pay separately for specific skin substitute products (other than products licensed under section 351 of the PHS Act, which will continue to be paid as biologicals under the ASP methodology in section 1847A of the Act) that are eligible for Medicare coverage during a covered application procedure in the non-facility setting as incident-to supplies in accordance with section 1861(s)(2)(A) of the Act. To reflect relevant product characteristics, we are finalizing to group skin substitutes that are not drugs or biologicals (that is, biological products licensed under section 351 of the PHS Act) using three CMS payment categories based on FDA regulatory pathways (PMAs, 510(k)s, and 361 HCT/Ps) to set payment rates. We believe that finalizing to pay for these supplies as incident-to supplies under the PFS, valued in groups by how the products are used, better aligns payment with the resources involved in the provision of these incident- to supplies during a covered application procedure and will generate payment stability over time. In the proposed rule, we estimated that under the proposal, which assumed a single rate of approximately $125.38 for CY 2026, there would be an estimated savings of $9.4 billion, based on a single year comparison to 2024 using claims data available at that time.

Based on the Midsession Review of the 2026 President's Budget baseline, which was released in August of this year, we estimate that gross fee-for-service program spending for skin substitute services would be reduced by $19.6 billion in 2026. This impact is higher than prior estimates due to the incorporation of actual experience so far in 2025, which is significantly higher than estimated. This higher experience resulted in higher projected growth in spending for these services.

Because the resources involved in provision of these supplies were not previously incorporated into RVUs under the PFS, the costs are not accounted for when we compare the RVUs for physicians' services from 1 year to the next. In other words, changes in payment rates for these particular codes will be incorporated into PFS relativity once we use claims data from 2026, should the policy be finalized. Under the usual methodology, that means that changes in rates for these services between CY 2027 and CY 2028 would have an impact on the development of PE RVUs for other services. Over time, we anticipated that our proposal will continue to result in significant overall price reductions since grouped valuation instead of product-specific pricing should result in downward pricing pressure in the market. Additionally, we do not anticipate an impact to beneficiaries' access to appropriate care. 2. Drugs and Biological Products Paid Under Medicare Part B a. Requiring Manufacturers of Certain Single-Dose Container or Single- Use Package Drugs To Provide Refunds With Respect to Discarded Amounts

Section 90004 of the Infrastructure Investment and Jobs Act (Pub. L. 117-58, November 15, 2021) amended section 1847A of the Act to require manufacturers to provide a refund to CMS for certain discarded amounts from a refundable single-dose container or single-use package drug. The refund amount is either as noted in section 1847A(b)(1)(B) of the Act in the case of a single source drug or biological or as noted in section 1847A(b)(1)(C) of the Act in the case of a biosimilar biological product, multiplied by the amount of discarded drug that exceeds an applicable percentage, which is required to be at least 10 percent, of total charges (subject to certain exclusions) for the drug in a given calendar quarter. In the CY 2023, 2024, and 2025 PFS final rules, we finalized several policies to implement the provision. In December of 2024, CMS sent discarded drug refund reports for CY 2023 “new refund quarters,” as defined at Sec. 414.902. The total refunds owed for these quarters amount to over $139 million, which was deposited into the Supplementary Medical Insurance (SMI) trust fund, as required by law. In section III.A.1 of this final rule, we discuss two applications (CMS 10835, OMB 0938-1435) for increased applicable percentage which will have no impact on Medicare spending. b. Average Sales Price: Price Concessions and Bona Fide Service Fees (Sec. Sec. 414.804[thinsp]and 414.802)

In section III.A.2 of this final rule, we finalized modifications to two aspects of the calculation of manufacturer's Average Sales Price (ASP), including price concessions and bona fide service fees (BFSFs). Both price concessions and BFSFs have direct implications on

the manufacturer's ASP. For example, if a manufacturer currently classifies an amount paid to an entity to be a BFSF but must reclassify the amount as a price concession under these proposed changes, the manufacturer's ASP would theoretically decrease. The resulting payment limit for the drug, typically ASP plus 6 percent, would also decrease. The opposite would also be true; that is, if a manufacturer considers an amount paid to an entity a price concession but then determines the amount to be a BFSF, the manufacturer's ASP would increase. However, we did not finalize the proposal to modify the definition of BFSF. Therefore, we anticipate that the finalized proposals will not have a significant impact on Medicare spending. Nevertheless, as the finalized policies will increase accuracy and transparency of ASP reporting, we anticipate that the finalized policy will likely result in reduced drug spending overall, resulting in decreases in ASP. If this occurs, there will be decreased spending on affected drugs. However, since details of arrangements and terms that manufacturers have with other entities are often not known to CMS, we are not able to quantify the possible changes in the payment limits for separately paid drugs under Medicare Part B. c. Impacts Related to Autologous Cell-Based Immunotherapy and Gene Therapy Payment

In section III.A.4. of this final rule, we finalized that preparatory procedures for patient-specific cell or tissue procurement required for manufacturing an autologous cell-based immunotherapy or gene therapy be included in the payment of the product itself. Since the payment for preparatory procedures is an extension of the current policy for a subset of these products, Chimeric Antigen Receptor (CAR) T-cell therapies, and these products are furnished to very few beneficiaries, we do not anticipate the finalized policy to have a significant financial impact.

In addition, we are not finalizing the proposal that, beginning January 1, 2026 (that is, data reflecting sales beginning on that date), any preparatory procedures for patient-specific cell or tissue procurement required for manufacturing an autologous cell-based immunotherapy or gene therapy that are paid by the manufacturer be included in the calculation of the manufacturer's ASP. Instead, when the four-part test at Sec. 414.802 is satisfied, these manufacturer- paid amounts may be treated as BFSFs and excluded from ASP. Because we have little information about how manufacturers currently factor in the cost of cell or tissue procurement into pricing these products, we cannot predict the exact financial impact on Medicare payment. However, given that the cost of cell or tissue procurement is typically a very small fraction of the overall cost of the product and that some manufacturer-paid amounts may be excluded from ASP under this policy, we anticipate that any financial impact will not be substantial. 3. Impacts Related to Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)

In section III.B.2. of this final rule, to continue alignment with the PFS and goals associated with APCM services, we finalized adoption of the add-on codes for APCM that would facilitate billing for BHI and CoCM services when RHCs and FQHCs are providing advanced primary care. We also finalized requiring RHCs and FQHCs to report individual codes that make up HCPCS code G0512. We also finalized requiring RHCs and FQHCs to report the individual codes that make up the communications technology-based services (CTBS), HCPCS code G0071. In addition, we finalized revisions to Sec. 405.2464(c) and (e) to reflect our proposal on payment of CoCM and CTBS services for RHCs and FQHCs. We also finalized the proposal to adopt services that are established and paid under the PFS and designated as care management services as care coordination services for purposes of separate payment for RHCs and FQHCs. In terms of the estimated impacts to the Medicare program, we believe that the finalized policies discussed in section III.B.2 of this final rule will have a negligible impact on Medicare spending.

In section III.B.3 of this final rule, we finalized the policy to adopt the definition “immediate availability” as including real-time audio and visual interactive telecommunications for the direct supervision permanently for all RHC and FQHC services and the definition of physician supervision at Sec. 405.2401(b). We finalized, on a temporary basis, to facilitate payment for non-behavioral health visits furnished via telecommunication technology using a payment methodology based upon payment rates that are similar to the national average payment rates for comparable telehealth services under the PFS. RHCs and FQHCs would continue to bill for RHC and FQHC services furnished using telecommunication technology services by reporting HCPCS code G2025 on the claim through December 31, 2026. We also finalized that, beginning October 1, 2025, there must be an in-person mental health service furnished within 6 months prior to the furnishing of the telecommunications service and that an in-person mental health service (without the use of telecommunications technology) must be provided at least every 12 months while the beneficiary is receiving services furnished via telecommunications technology for diagnosis, evaluation, or treatment of mental health disorders, unless, for a particular 12-month period, the physician or practitioner and patient agree that the risks and burdens outweigh the benefits associated with furnishing the in-person item or service, and the practitioner documents the reasons for this decision in the patient's medical record. As such, finalized revisions to 42 CFR part 405, subpart X, specifically, at Sec. 405.2463(b)(3), “What constitutes a visit,” and, at Sec. 405.2469(d) “FQHC supplemental payments,” as proposed.

We believe these RHC/FQHC policies related to telecommunication technology will have a negligible impact on Medicare spending. 4. Ambulatory Specialty Model (ASM) a. Scale of the Model

As we discuss in sections III.C.2.c.(4) and III.C. l. of this final rule, there is no one-size-fits-all approach to designing, implementing, and evaluating Innovation Center models. Each payment and service delivery model tested by the Innovation Center is unique in its goals, and thus its design. Models vary in size to accommodate various design features and satisfy a variety of priorities. Decisions made regarding the features and design of the model strongly influence the extent to which the evaluation will be able to accurately assess the effect of a given model test and produce clear and replicable results.

The Innovation Center conducts analyses to determine the ideal number of participants for each model for evaluation purposes. This analysis considers a variety of factors including the target population (for example, Medicare beneficiaries with select chronic conditions), model eligibility (for example, participant eligibility criteria for inclusion in the model), participant enrollment strategy (for example, mandatory versus voluntary) and, the need to test effects on subgroups. Model size can also be influenced by the type and size of hypothesized effect on beneficiary

outcomes, such as quality of care, or the target level of model savings. The smaller the expected impact a model is hypothesized to achieve, the larger a model needs to be for CMS to have confidence in the observed impacts.

An insufficient number of participants increases the risk that the evaluation will be imprecise in detecting the true effect of a model, potentially leading, for example, to a false negative or false positive result. The goal is to design a model that is sufficiently large to achieve adequate precision but not so large as to waste CMS' limited resources. These decisions affect the quality of evidence CMS can present regarding the impacts of a model on quality of care, utilization, and spending.

In the case of ASM, in this final rule we have determined the sample size necessary for a minimum estimated savings impact of 3.5 percent. While savings higher than 3.5 percent would require a smaller sample size from an evaluation perspective, if we were to reduce the size of ASM and if the actual savings are at or just below the 3.5 percent level, then we would increase the risk of being unable to detect whether ASM resulted in savings.

We expect that ASM will include approximately 25 percent of all CBSAs and metropolitan divisions. As finalized at Sec. 512.710(f), a CBSA or metropolitan division must have at least one clinician of the required specialty types who furnished at least 20 eligible episodes heart failure and at least one clinician of the required specialty types who furnished at least 20 eligible low back pain episodes between January 1, 2024 and December 31, 2024 to be eligible for selection into ASM. We performed a simulation based on our proposed policies. We simulated the random selection of CBSAs and metropolitan divisions using CY 2023 data based on the methodology finalized at Sec. 512.710(f), which will allow us to detect the minimum estimated savings impact of 3.5 percent described earlier in this section of this final rule.

Based on this simulation, we expect to have approximately 3,400 ASM heart failure participants billing under 1,160 TINs and approximately 5,200 ASM low back pain participants billing under 2,400 TINs in the simulated mandated geography areas. Within the ASM heart failure cohort, we expect ASM to include approximately 164,000 unique heart failure episodes, 162,600 unique beneficiaries triggering episodes, and $1.6 billion in total episode FFS spending (Medicare Part A and Part B only) of allowed charges for each ASM performance year. Within the ASM low back pain cohort, we expect ASM to include approximately 441,000 unique low back pain episodes, 398,500 unique beneficiaries triggering episodes, and $1.2 billion in total episode FFS spending of allowed charges for each ASM performance year. To determine the number of ASM participants in each ASM cohort, we counted the number of clinicians in mandatory geographic areas (as described at Sec. 512.710(f)) with the selected specialty types (as described at Sec. 512.710(d)) that furnished at least 20 episodes related to the ASM's cohort targeted chronic condition in CY 2023 (as described at Sec. 512.710(e)). Similarly, to determine episode count, beneficiary count, and total spending estimates, we drew upon the historical data of ASM participants in the simulated mandatory geographic areas selected for participation.

We solicited public comments on the proposed scale of ASM.

We did not receive public comments on the scale of ASM, and therefore, we are finalizing provisions related to the random selection of CBSAs as described at Sec. 512.720(f). We refer readers to section III.C.2.c.(4). of this final rule for a summary of comments received related to ASM's mandatory geographic areas and our responses. b. Effects on ASM Participants

ASM will not alter the way ASM participants bill Medicare. Therefore, we believe that there will be no additional burden for ASM participants related to billing practices.

We believe the audit and retention policies of ASM are generally consistent with existing policies under Medicare. Additionally, the monitoring requirements for ASM are consistent with the monitoring and evaluation requirements already in place under 42 CFR 405.1110(b) for participants in models tested under section 1115A of the Act. Therefore, we believe the audit and retention policies and the monitoring and evaluation requirements do not add additional regulatory burden on ASM participants.

We do not believe that the model evaluation for ASM would include beneficiaries or clinicians completing surveys.

We estimated the administrative costs of adjusting to and complying with the measure reporting requirements for ASM to be approximately $3,077.36 per ASM participant per year. We believe the burden estimate for submitting data to meet the proposed quality, improvement activities, and Promoting Interoperability measure reporting requirements in sections III.D.C.d.(2)., III.C.2.d.(4)., and III.C.2.d.(5). of this final rule will apply to ASM participants that are and are not considered small entities (see section VI.E.7.b.(1). of this final rule for further discussion on the estimated effects of ASM on small businesses). To estimate the costs per ASM participant, we estimate the burden for submitting data in the quality, improvement activities, and Promoting Interoperability ASM performance categories generally using the same assumptions for time and labor categories for the staffing that the Quality Payment Program uses for MVP submissions in section V. of this final rule. As discussed in section III.C.2.d.(1).(b). of this final rule, ASM participants will not need to submit data for the cost ASM performance category and the administrative claims measures in the quality ASM performance category. Therefore, we did not estimate burden for the administrative claims measures in the cost and quality ASM performance categories.

To estimate the burden for submitting quality measure data for an ASM cohort as described in section III.C.2.d.(2). of this final rule, we assume 50 percent of the ASM participants will submit data on quality measures using the eCQM collection type, and the remining 50 percent of the ASM participants would submit data using the MIPS CQM collection type. For an ASM participant to submit a quality measure using the eCQM collection type, we assume it will take a total of 5.3 hours [1.33 hours for a computer system analyst to submit data, 1.33 hours for a Medical and Health Services Manager to review the measure specifications, and 0.66 hours each for a computer system analyst, Licensed Practical Nurse (LPN), billing clerk, and physician to review the measure specifications]. For an ASM participant to submit a quality measure using the MIPS CQM collection type, we assume it will take a total of 5.97 hours [2 hours for a computer system analyst to submit data, 1.33 hours for a Medical and Health Services Manager to review the measure specifications, and 0.66 hours each for a computer system analyst, LPN, billing clerk, and physician to review the measure specifications]. To calculate the estimated cost, we used the May 2024 wage rate data from the U.S. Department of Labor (https://www.bls.gov/oes/current/oes_nat.htm) and doubled the mean hourly wage to account for overhead and benefits. Accounting for overhead and benefits, we used salary estimates of $107.66/hr for a computer systems analyst, $132.44/hr for a Medical and Health Services Manager,

$61.68/hr for a LPN, $47.60/hr for a billing clerk, and $296.74/hr for a physician. We estimated it would require ASM participants approximately 21.2 hours (4 eCQM measures x 5.3 hours) to submit data using the eCQM collection type or 23.88 hours (4 MIPS CQMs x 5.97 hours) to submit data using the MIPS CQM collection type for the required four quality data measures once annually. We estimate it would cost $658.37 (1.33 hours x $107.66/hr + 1.33 hours x $132.44/hr + 0.66 hours x $61.68/hr + 0.66 hours x $47.60/hr + 0.66 hours x $296.74/hr) per measure to submit quality data using the eCQM collection type and $730.50 (2 hours x $107.66/hr + 1.33 hours x $132.44/hr + 0.66 hours x $61.68/hr + 0.66 hours x $47.60/hr + 0.66 hours x $296.74/hr) per measure to submit quality data using the MIPS CQM collection type. Therefore, we estimate the total annual cost for an ASM participant to submit the required measures in the quality ASM performance category using the eCQM collection type would be $2,633.48 (4 eCQM measures x $658.37) or $2,922 (4 MIPS CQM measures x $730.50) using the MIPS CQM collection type.

We also estimate that data submission of the proposed improvement activities discussed in section III.C.2.d.(4). of this final rule will take 0.083 hours (or 5 minutes) and will be required once annually per ASM participant. Data submission for the Promoting Interoperability measures discussed in section III.C.2.d.(5). of this final rule will take 2.7 hours and will occur once annually per ASM participant. We used the salary estimate of $107.66/hr for a computer systems analyst to estimate burden for submitting data in the Promoting Interoperability and improvement activities ASM performance categories. For an ASM participant to submit data for the improvement activities ASM performance category, we estimate it will cost $8.94 ($107.66/hr x 0.083 hours x 1 submission). For data submission for the Promoting Interoperability ASM performance category, we estimate it will cost $290.68 ($107.66/hr x 2.7 hours x 1 submission). We estimate that the burden for collecting and reporting quality, improvement activities, and Promoting Interoperability measures for an ASM participant submitting data using the eCQM collection type will be 23.983 hours (21.2 hours + 0.083 hours + 2.7 hours) at a cost of $2,933.10 ($2,633.48 + $8.94 + $290.68) and 26.663 hours (23.88 hours + 0.083 hours + 2.7 hours) at a cost of $3,221.62 ($2,922 + $8.94 + $290.68) for an ASM participate submitting data using the MIPS CQM collection type. We estimate approximately 7,622 ASM participants that will report data, therefore, the total burden estimate for all ASM participants collecting and reporting the measures in the quality, improvement activities, and Promoting Interoperability performance categories will be approximately 193,012 hours (23.983 hours x 3,811 ASM participants + 26.663 hours x 3,811 ASM participants) at a cost of $23,455,621 ($2,933.10 x 3,811 ASM participants + $3,221.62 x 3,811 ASM participants).

Additionally, we assume that approximately 50 percent of ASM participants that are currently not participating in MIPS will need to submit a one-time registration to access the CMS Enterprise Portal User Account (EUA). We estimate that it will take approximately 1 hour for an ASM participant or their representative to submit the registration for EUA. We used the salary estimate of $107.66/hr for a computer systems analyst to submit the registration for EUA access. Therefore, we estimate it will cost $107.66 ($107.66/hr x 1 hour) per registration. We estimate approximately 530 ASM participants will submit the application for EUA access. Therefore, the total burden estimates for ASM participants submitting the registration for EUA access will be approximately 530 hours at a cost of $ 57,059.80 (530 hours x $107.66/hr). We note that we did not include the estimated burden for submitting the registration for EUA access in calculating the total estimated burden per ASM participant as this submission does not occur annually.

We solicited public comments on our proposed estimated burden impacts on ASM participants.

We did not receive public comments about the estimated burden impacts on ASM. Therefore, we refer readers to section III.C.2 of this final rule for summaries of comments received, our responses to those comments, and our finalized provisions related to ASM. c. Effects on Small Entities

As described in section VI.H of this final rule, the RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. HHS uses an RFA threshold of at least a 5 percent impact on the affected entities within an identified industry to determine whether a proposed rule is likely to have “significant” impacts on small entities.\479\ Approximately 95 percent of practitioners, other suppliers, and providers are considered small entities, based upon the SBA standards. There are over 1 million physicians, other practitioners, and medical suppliers that receive Medicare payment under the PFS. Because many of the affected entities are small entities, the analysis and discussion provided in this section is intended to comply with the RFA requirements regarding significant impact on a substantial number of small entities. Although many ASM participants may be small entities as that term is used in the RFA, the proportion of revenue from Medicare Part B covered professional services to which ASM would adjust payments would represent a small fraction of revenue generated by the ASM participant.

\479\ Office of Advocacy, Small Business Administration. (2012). A Guide for Government Agencies, How to Comply with the Regulatory Flexibility Act, Implementing the President's Small Business Agenda and Executive Order 13272, Retrieved from www.sba.gov/sites/default/files/rfaguide_0512_0.pdf (accessed March 18, 2019).

Our analysis assumed that ASM would include only Medicare FFS beneficiaries receiving services from ASM participants. During 2024, 53.3 percent of Medicare beneficiaries with both Medicare Part A and Part B coverage on average are estimated to be enrolled in Medicare Advantage plans.\480\ ASM participants may also serve patients with other coverage, such as Medicaid or commercial insurance. Given that ASM would only adjust payments to Medicare Part B payments for covered professional services based on performance--not other revenue from other payers like Medicare Advantage and commercial insurance that we expect to be about 50 to 60 percent of total revenue combined--we expect that the anticipated average impact of revenue based solely on Medicare Part B payments for covered professional services to be less than 1 percent. Therefore, we determine that the finalized provisions of ASM will not have a greater than 5 percent impact on total revenues on a substantial number of small entities.

\480\ This figure comes from the 2024 Medicare Trustees Report, Table IV.C1, p157 from the footnote that has the A and B share.

As discussed in section VI.E.b.(1). of this final rule, we believe that burden estimate of reporting the required measures and activities for ASM will be the same for ASM participants regardless of their small business status.

We solicited public comments on our analysis that estimates no differential impact of ASM on small entities.

We did not receive public comments on the impact of ASM on small entities. Therefore, we refer readers to section III.C.2 of this final rule for summaries of comments received, our responses to those comments, and our finalized provisions related to ASM. d. Effects on the Medicare Program (1) Overview

Under the current Medicare FFS payment system, services are paid on a per service basis to clinicians through the PFS. As a mandatory model, ASM will test whether rewarding clinicians based on measures of quality, cost, care coordination, and CEHRT interoperability results in enhanced quality of care and reduced costs through more effective upstream chronic condition management. ASM will test adjusting Medicare Part B covered professional services claims of an ASM participant according to a payment adjustment that is determined by an ASM participant's performance on a set of measures they must report (see sections III.C.2.d and III.C.2.f of this final rule). For each ASM participant, the payment adjustment amount will be determined as proposed at Sec. 512.750.

ASM is not a total cost of care model. ASM participants will still bill traditional FFS Medicare for services as usual. (2) Data and Methods

A simulation based on the proposed policies was created to estimate the financial impacts of ASM. The simulation relied upon simulated final scores and ASM payment adjustments, as well as assumptions derived from EBCM episodes related to ASM's targeted chronic conditions from CY 2023 and Medicare FFS claims data. We reviewed these assumptions and determined them to be reasonable for the estimates.

We simulated an ASM final score based on the methodology described in sections III.C.2.d and III.C.2.e of this final rule.

For scoring the quality ASM performance category, we first made assumptions on who would report based on whether clinicians were engaged in the CY 2023 MIPS performance period/2025 MIPS payment year and submitted data. We believe that historical engagement and submission of data to MIPS would be an appropriate predictor of an ASM's participant likelihood to submit data to meet ASM's requirements. For clinicians we identified as engaged, we assumed the ASM participants would report all required quality measures (meeting data completeness requirements and case minimum requirements) as discussed in section III.D.2.d.(2). For ASM participants who were eligible for the 2023 MIPS performance period/2025 MIPS payment year, we generally assigned participants as engaged or not engaged based on their 2023 MIPS participation. We carved out an exception for clinicians who were labeled “not engaged” in MIPS but had MIPS final scores of 75 as we believe most of these clinicians received extreme and uncontrollable circumstances approval (which will result in a final score of 75 points equal to the MIPS performance threshold).\481\ For these participants, we cleared the engaged status flag. For ASM participants who did not have a populated engaged status flag (either because they were not eligible for CY 2023 MIPS performance period/2025 MIPS payment year or because we cleared their engaged status flag as described earlier), we randomly assigned engaged and not engaged flags, based on practice size, to mimic the proportion of ASM participants who were engaged and not engaged in the CY 2023 MIPS performance period/2025 MIPS payment year. This process resulted in all ASM participants receiving an engaged or not engaged assumption for the purpose of simulating a final score and payment adjustment.

\481\ We also excluded one participant, who was facility-based, who had a score greater than 75.

In calculating a quality ASM performance category score for engaged participants (and we assumed participants would submit all quality measures meeting data completeness and case minimum requirements), we did not have adequate historical MIPS performance data for the proposed measures in sections III.C.2.d.(2).(b) and III.C.2.d.(2).(c). of this final rule. Therefore, we randomly assigned measure achievement points for each proposed ASM measure. The values ranged from 1 to 10 based on decile benchmarks to simulate performance using benchmarks based on ASM participants only. We recognize that this method may not accurately assign performance for an individual. However, we believe it approximates the relative differences within a benchmark distribution and represents the best available approach given that most ASM participants that previously participated in MIPS did not submit the proposed quality ASM performance category measures in MIPS.

For the ASM participants we identified as not engaged and assumed they would not submit quality measures, we assigned a score of zero for the quality ASM performance category. Ultimately, these non-engaged ASM participants received an ASM final score of zero in our model for not meeting the required minimum data submission requirements, as discussed in section III.C.2.e.(2) of this final rule.

For the cost ASM performance category score proposed in section III.C.2.d.(3) of this final rule, we assigned measure achievement points and calculated a cost ASM performance category score using heart failure and low-back pain episode-based cost measure files based on CY 2023 administrative claims data.

To simulate the improvement activity ASM performance category score and scoring adjustment that is proposed in section III.C.2.d.(4).(d). of this final rule, we relied on the same engagement assumptions that we used for the quality ASM performance category. We assumed that engaged ASM participants will also report all the required improvement activities. These ASM participants would have an improvement activities ASM performance category score of 100 percent and will not have any negative ASM improvement activities scoring adjustment. For ASM participants we identified as not engaged, we assigned an ASM performance category score of zero and an improvement activities ASM performance category scoring adjustment of negative 20 points.

For the Promoting Interoperability ASM performance category, we calculated the Promoting Interoperability ASM performance category score and scoring adjustment discussed in section III.C.2.d.(5).(e). of this final rule using proxies for the Promoting Interoperability ASM performance category score. Our primary proxy for the Promoting Interoperability ASM performance category score was to use the CY 2023 MIPS performance period/2025 MIPS payment year Promoting Interoperability performance category score where it was available. The Promoting Interoperability ASM performance category scoring adjustment was calculated using the formula discussed in section III.C.2.e.(1). of this final rule. If an ASM participant was not eligible for the 2023 MIPS performance period/2025 MIPS payment year, we assumed that the Promoting Interoperability ASM performance category score will be 100, as over half of potential ASM participants that were eligible in the CY 2023 MIPS performance period/2025 MPS payment year and reported

Promoting Interoperability information had a Promoting Interoperability performance category score of 100. ASM participants with a Promoting Interoperability ASM performance category score of 100 would not have a negative scoring adjustment for the Promoting Interoperability ASM performance category. For ASM participants who were in the CY 2023 MIPS performance period/2025 MIPS payment year but did not have a 2023 MIPS Promoting Interoperability performance category score because the performance category was reweighted, we assumed these participants may not have CEHRT and thus may not be able to report measures for the Promoting Interoperability ASM performance category. For these ASM participants, we assumed a Promoting Interoperability ASM performance category score of 0 which translates into a Promoting Interoperability ASM performance category scoring adjustment of negative 10 points. We anticipated that these clinicians could use CEHRT in the future and that we may be overestimating the number of ASM participants without CEHRT.

Finally, we simulated a final score for each ASM participant using the formula proposed in section III.C.2.e. of this final rule. As described in this same section, we utilized scores for the quality and cost ASM performance categories and the scoring adjustments for the improvement activities and Promoting Interoperability ASM performance categories. We also calculated a complex patient scoring adjustment, described in section III.C.2.e.(3). of this final rule, and applied a small practice scoring adjustment, described in section III.C.2.e.(4). of this final rule, using variables in the Quality Payment Program final eligibility file for the CY 2023 MIPS performance period/2025 MIPS payment year. As described earlier in this section, any ASM participants who we assumed would not be engaged, were assigned a final score of zero points.

Using the simulated final scores for ASM participants, we simulated the resulting payment adjustments using the methods described in section III.C.2.f. of this final rule. We used Medicare Part B paid amounts from claims for covered professional services in CY 2023 to calculate each ASM incentive pool. For each ASM cohort, we calculated the scaling factor and the resulting ASM payment adjustment factor and ASM payment multiplier for each ASM participant based on their final score and the proposed logistic exchange function with a midpoint at the median final score for the applicable ASM cohort.

We solicited comments on our methods to estimate an ASM final score, ASM payment adjustment factor, and ASM payment multiplier for each ASM participant.

We did not receive public comments on the data and methods used to simulate an ASM final score, ASM payment adjustment factor, and ASM payment multiplier for each ASM participant. Therefore, we refer readers to section III.C.2 of this final rule for summaries of comments received, our responses to those comments, and our finalized provisions related to ASM. (3) Medicare Estimates

In this final rule, we summarized the estimated impact of ASM in Table D-B8. We estimate a net impact of $177 million in net savings to the Medicare program due to ASM from January 1, 2029 through December 31, 2033.

The estimated impact reflects the finalized provisions described in this final rule. To summarize relevant finalized provisions, we will test ASM for five performance years from January 1, 2027 through December 31, 2031 with payment adjustments occurring in corresponding ASM payment years from January 1, 2029 through December 31, 2033. As discussed earlier in this section of this final rule, ASM will operate in 25 percent of all CBSAs and metropolitan divisions. ASM participants will be subject to a maximum risk level for each ASM payment year, which will would range from 9 percent to 12 percent over the ASM test period, and under which an ASM participant will receive an ASM payment adjustment factor based on their final score and the amount of each ASM incentive pool distributed to each ASM cohort in the form of scaled payment adjustments.

The estimated impact uses Medicare Part B paid amounts for covered professional services attributed to the simulated ASM participants in CY 2023 to determine the baseline spending. We trended the baseline spending in CY 2023 forward to the ASM payment years (CY 2029 through CY 2033) using the trend assumptions underlying the 2024 Medicare Trustees Report. We calculated the financial impact percentage as the downward ASM risk level (that is, the percentage of ASM participant spending at risk for each ASM participant for a given ASM payment year) multiplied by 15 percent (that is, the average amount of the ASM incentive pool that will not be distributed to ASM participants in the form of payment adjustments). We applied this financial impact percentage to the trended baseline spending for each ASM payment year. The estimates in Table D-B8 do not account for behavioral effects that could occur as a result of implementing ASM. We refer readers to the sensitivity analysis later in this section of this final rule for further discussion on potential behavioral effects on spending as a result of ASM.

Thus, we estimate that the Medicare program would save $177 million over ASM's model test period. This estimate excludes changes in beneficiary cost sharing liability to the extent it is not a Federal outlay under the policy. [GRAPHIC] [TIFF OMITTED] TR05NO25.178

We solicited public comments on our estimated impact of ASM on the Medicare program.

We did not receive public comments about our estimated impact of ASM on the Medicare program. Therefore, we refer readers to section III.C.2 of this final rule for summaries of comments received, our responses to those

comments, and our finalized provisions related to ASM. (i) Sensitivity Analysis

ASM participants will receive payment adjustments based on their final scores. We expect these payment adjustments to incentivize participants to improve their ASM performance category scores, which will impact costs. The degree to which the participants will be incentivized to alter their behavior will depend on the magnitude of the payment adjustments, and the magnitude of the payment adjustment, including whether it is positive or negative, depends on the distribution of final scores used in the payment adjustment calculation. Since that distribution is unknown, we have not incorporated behavioral effects into the estimate.

There is evidence that shows that delivering higher-value care could lead to savings for Medicare. For example, better adherence to clinical guidelines for heart failure patients under ASM could reduce the number of hospitalizations that occur among ASM beneficiaries. Since hospitalizations and associated costs comprise a large share of total heart failure patient spending, such changes could reduce spending significantly. Similarly, improved adherence to clinical guidelines for low back pain could lead to lower rates of imaging service use, fewer invasive surgeries, and lower spending among ASM beneficiaries. However, it is unknown how well these changes in care patterns could ultimately be implemented.

Alternatively, some of the quality measures used in determining final scores could motivate ASM participants to deliver more services than they would have absent the model. For example, preventive care and screening metrics for BMI and depression could incentivize participants to provide more care for some patients with low back pain, and metrics on controlling high blood pressure could have a similar effect. Another consideration is that ASM participants could react to negative payment adjustments with adverse behavior (for example, increasing coding intensity) to help offset revenue losses.

To explore the potential financial impacts of these behavioral effects, we adjusted the original impact estimates under several illustrative scenarios using different amounts of behavioral effects, measured in percent change in spending. Table D-B9 shows estimated financial impacts on total Medicare Parts A and B spending from heart failure and low back pain episodes attributed to our simulated ASM participants based on the estimated behavioral effect levels. The estimated financial impacts presented in Table D-B9 present one set of assumptions on the behavioral effect on spending; the behavioral impact on spending could be larger in magnitude than the illustrative scenarios here. The resulting financial impact estimates (in millions of dollars) of each scenario in Table D-B9 represent the total estimated impact across ASM's test period. [GRAPHIC] [TIFF OMITTED] TR05NO25.179

We solicited public comments on our sensitivity analysis related to the estimated financial impacts of ASM.

We did not receive public comments on our sensitivity analysis related to the estimated financial impacts of ASM on the Medicare program. Therefore, we refer readers to section III.C.2. of this final rule for summaries of comments received, our responses to those comments, and our finalized provisions related to ASM. e. Effects on the Market

There could be spillover effects in the non-Medicare market, because of the implementation of ASM. Testing changes in Medicare payment policy may have implications for non-Medicare payers. For example, non-Medicare patients may benefit if participating providers and suppliers introduce system-wide changes that improve the coordination and quality of health care. Other payers may also be developing payment models and may align their payment structures with CMS or may be waiting to utilize results from CMS' evaluations of payment models. Because there is uncertainty about whether and how this evidence applies to a test of these new payment models, our analyses assume that spillover effects on non-Medicare payers would not occur, although this assumption is subject to considerable uncertainty. We solicit comments on this assumption and evidence on how this rulemaking would impact non-Medicare payers and patients.

We solicited public comments on our impact of ASM on the market.

We did not receive public comments on our estimated impact of ASM on the market. Therefore, we refer readers to section III.C.2. of this final rule for summaries of comments received, our responses to those comments, and our finalized provisions related to ASM. 5. Impact of Provisions for Medicare Prescription Drug Inflation Rebate Program

In this final rule, we finalized new policies to implement the Medicare Part B Drug Inflation Rebate Program, including CMS' method for calculating the payment amount in the payment amount benchmark quarter if a published payment limit is not available or if there is no published payment limit and neither positive Average Sale Price (ASP) nor positive Wholesale Acquisition Cost (WAC) data are available in the ASP Data Collection System. Additionally, we finalized revised and new policies to implement the Medicare Part D Drug Inflation Rebate Program, including but not limited to, a claims-based methodology to implement Sec. 428.203(b)(2), which

provides that, for claims with dates of service on or after January 1, 2026, and with respect to an applicable period, CMS will exclude from the total number of units used to calculate the total rebate amount for a Part D rebatable drug those units of the Part D rebatable drug for which a manufacturer provided a discount under the 340B Program and the establishment of a Part D claims data 340B repository to receive voluntary submissions from 340B covered entities of certain data elements from Part D 340B claims.

We do not expect the proposed policies regarding the Medicare Part B and Part D Drug Inflation Rebate Program to have a material impact on the calculation of total rebates in aggregate, as these proposals are refinements to regulatory requirements and do not otherwise change the scope of rebatable drugs.

In the CY 2025 PFS final rule (89 FR 98593), CMS finalized the proposal at Sec. 428.203(b)(2)(i) to exclude from the total number of units determined at Sec. 428.203(a) units for which a manufacturer provided a discount under the 340B Program (“340B units”), as well as the proposal at Sec. 428.203(b)(2)(ii) to determine the total number of 340B units by using data reflecting the total number of units of a Part D rebatable drug for which a discount was provided under the 340B Program and that were dispensed during the applicable period. However, after consideration of the data limitations of the proposed estimation methodology and public comments, CMS did not finalize the proposed estimation methodology for the applicable period that begins on October 1, 2025. Instead, CMS stated that it would explore avenues to implement section 1860D-14B(b)(1)(B) of the Act, which requires the exclusion from the total number of units for a Part D rebatable drug those units for which a manufacturer provides a discount under the 340B Program starting January 1, 2026, through the establishment of a 340B repository. CMS did not repropose the estimation methodology proposed in the CY 2025 PFS proposed rule but did consider this estimation percentage as an alternative to the proposal this year, as described in section III.E.3.c.iii. of this final rule titled “Alternative Policy Considered”. Rather, we finalized at Sec. 428.203(b)(2) implementation of a claims-based methodology to remove 340B units beginning January 1, 2026. We also finalized the establishment of a 340B repository to receive voluntary submissions from covered entities of certain data elements from Part D 340B claims to allow CMS to assess such data for use in identifying 340B units for removal in a future applicable period.

We do not anticipate our inflation rebate proposed policies will result in an incrementally significant financial impact on the Medicare program relative to a baseline that reflects the status quo in the absence of any modifications to inflation rebate regulations at parts 427 and 428 as these finalized policies are refinements to regulatory requirements.

We did not receive public comments on these provisions, and therefore, we are finalizing as proposed. 6. Medicare Shared Savings Program a. General Impacts

As of January 1, 2025, 11.2 million Medicare beneficiaries receive care from a healthcare provider in one of the 477 ACOs participating in the Shared Savings Program.\482\ The modifications to the Shared Savings Program policies we are finalizing in this final rule are designed, in part, to further improve the quality of care furnished by ACOs by revising the quality performance standard and reporting requirements, encourage more ACOs to move to a two-sided risk model, and promote the continued integrity and fairness of Shared Savings Program financial calculations.

\482\ See “Shared Savings Program Fast Facts--As of January 1, 2025”, available at https://www.cms.gov/files/document/2025-shared-savings-program-fast-facts.pdf.

As we described in the CY 2026 PFS proposed rule (90 FR 32814), the ACOs in the program in performance year 2023 combined to cover $128 billion in benchmark target spending. Actual ACO spending totaled approximately $123 billion--about $5.2 billion below combined benchmark. After accounting for $3.1 billion in net shared savings to ACOs, the remaining difference of $2.1 billion would represent federal savings from the program if benchmarks proved to be a perfect counterfactual in aggregate. The Regulatory Impact Analysis in the December 2018 final rule (see 83 FR 68044 through 68050) provided evidence that the benchmarks for performance year 2016 combined to represent a lower spending target than the theoretical counterfactual for estimating what spending would have been in the total FFS Medicare Program had ACOs not been present that year. Evidence included all of the following:

Lower combined market level spending trends observed for cohorts of Hospital Referral Regions (HRRs) with significant ACO formation relative to other HRRs without material ACO activity.

Spillover effects on spending outside of ACO benchmarks, including non-assigned beneficiaries served by ACO providers and suppliers.

Program design elements that restrained benchmark levels, including rebasing with agreement periods of only 3 years, feedback of communal ACO effects on national trends used to update benchmarks, and restrictions on risk adjustment.

The Regulatory Impact Analysis in the December 2018 final rule (83 FR 68048) estimated that ACOs may have been responsible for half of the 1.2 percent difference in spending trend observed between national average and the subset of HRRs with minimal ACO activity through 2016. This scaled impact represented about four times the gross savings measured relative to benchmarks, or about 0.5 percent net savings across the entire FFS program after accounting for shared savings payments despite benchmarks only officially showing roughly equivalent overall reductions in spending relative to benchmark compared to total outlays from shared savings payments. Since 2016, changes to the Shared Savings Program have potentially moved the benchmarks closer to what the spending would have been in the absence of the program.

In the CY 2026 PFS proposed rule (90 FR 32814 through 32815), we explained that updating the earlier study to compare more recent trends for markets with varying levels of ACO activity requires updates to the initial study approach, as ACOs have become active in an increasing majority of markets across the nation. There no longer exists a sufficient number of HRRs with nominal ACO penetration in 2023 to construct a de facto counterfactual similar to the study in the December 2018 final rule. An alternate method, however, continues to show spending trends inversely correlated with ACO penetration over time. Roughly 5 percent of beneficiaries live in HRRs with ACO penetration consistently below the national average by 10 percentage points or more over the 2013 to 2023 time series (“Lagging”) while about 9 percent of beneficiaries live in HRRs with ACO penetration 10 percentage points or more above the national average over the same period (“Leading”). Relative to the 2011 base year immediately preceding the Shared Savings Program's introduction, growth in average unadjusted per capita spending in 2023 for Lagging and Leading markets was 4.3 percent higher and 3.9 percent lower than the national average. The divergence in spending growth was even wider after HCC risk

adjustment: 5.3 percent higher for Lagging markets and 4.6 percent lower for Leading markets.

These market trends potentially overstate the impact that ACOs may have had on program spending in 2023. The portion of the difference in spending growth driven by risk adjustment may reflect efforts by ACOs to increase coding intensity. Leading markets may exhibit higher participation rates in CMMI models. ACO participation may naturally flock to markets with lower trend for exogenous reasons. Still, conservatively assuming only 35 percent of the unadjusted trend gap is causally related to Shared Savings Program ACOs would roughly validate the $5.2 billion gross savings indicated by comparing aggregate program benchmarks to actual ACO spending in 2023, and the roughly $2 billion in net savings to FFS Medicare. A more optimistic estimate, assuming Shared Savings Program ACOs were responsible for 50 percent of the risk-adjusted spending growth difference (mirroring assumptions used in the December 2018 final rule), would imply net savings roughly 3 times greater, or roughly $6 billion net savings for FFS Medicare.

In the CY 2026 PFS proposed rule (90 FR 32815 through 32816), we explained that a study of benchmark performance for cohorts of ACOs that participated in both performance year 2022 and performance year 2023 (with related details in Table D-B10) reveals that the BASIC track is the primary driver of net savings (as measured by program benchmark target spending less actual spending and shared savings payments). Twenty-five ACOs moved from a one-sided model of the BASIC track (Level A or B) to a two-sided model of the BASIC track (Level C, D or E) over performance year 2022 to 2023 and showed the highest rates of net savings to the program at 2.4 percent of benchmark. One hundred six ACOs remained in two-sided models of the BASIC track (Levels C, D or E) over that same 2-year period and reached 2.3 percent net savings. Both cohorts showed the lowest average unadjusted per capita spending trend over this 2-year period at about 6 percent. One hundred thirty-nine ACOs remained in one-sided models of the BASIC track (Level A or B) over both years and saw net savings grow from 1.4 percent to 1.7 percent by 2023. The 135 ACOs that remained in the ENHANCED track over these 2 years showed 1.3 percent net savings in 2023, up slightly from 1.2 percent for 2022. Findings are compared for each cohort in the study in Table D-B10. [GRAPHIC] [TIFF OMITTED] TR05NO25.180

We will continue to study program data as it emerges, including the extent that new ACOs serving higher spending populations of beneficiaries enter the program and drive down spending in the BASIC track, and whether ACOs with lower relative spending migrating to the ENHANCED track are able to demonstrate materially lower spending trend after multiple years under that higher incentive arrangement.

Two changes to Shared Savings Program policies, described in section III.F. of this final rule, are estimated to have a material impact on overall program spending. First, we anticipate that there may be an incremental cost to allowing only 5 performance years in a one- sided model (down from 7 performance years under the current regulations) for ACOs that are

inexperienced with performance-based risk Medicare ACO initiatives, with no prior participation in the Shared Savings Program, entering an agreement period beginning on or after January 1, 2027. The cost would depend on the frequency that the extra 2 performance years in a one- sided model would have proven essential for certain ACOs serving higher-cost populations of beneficiaries to transition to performance- based risk and remain in the Shared Savings Program for multiple agreement periods. We have already implemented Shared Savings Program changes to increase participation from this general type of ACO, including ending negative regional adjustments to benchmarks, implementing the health equity benchmark adjustment (in this final rule being renamed “population adjustment”), and providing a prior savings adjustment to the rebased benchmark. However, some ACOs remaining under a one-sided model throughout their first agreement period would likely face significant uncertainty in predicting how these policies may or may not help provide margin for their rebased benchmark at the start of a potential second agreement period. Some such ACOs may find that uncertainty an insurmountable hurdle to renewing their participation in the Shared Savings Program directly into performance-based risk in the first year of their second agreement period. On the other hand, there is a potential for improved care management and increased savings from other ACOs that successfully manage the transition to performance-based risk earlier than they would have, if they had access to 7 performance years instead of 5 performance years of one-sided model participation in the Shared Savings Program. On net, we project the eventual termination of participation by some ACOs will involve a marginally greater reduction in program savings compared to the potential increase in efficiency from earlier transition to performance-based risk from other ACOs, leading to $370 million higher spending over 10 years, ranging from $50 million lower spending to $920 million higher spending at the 10th and 90th percentiles, respectively. The annual and 10-year total projections for the changes to Shared Savings Program participation options are detailed in Table D-B11. [GRAPHIC] [TIFF OMITTED] TR05NO25.181

The second area of material impact on program spending is from the policies to allow ACOs to enter a new agreement period in the BASIC track when an ACO has fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, in combination with capping the shared savings or shared losses at a lesser amount for ACOs with fewer than 5,000 assigned beneficiaries in any of the three benchmark years. These policies are expected to marginally increase participation by ACOs that would have otherwise been unable to satisfy the 5,000 assigned beneficiary minimum in BY1, BY2, or both, and to do so under an alternative cap that provides a safeguard against excessive payments if assignment were to grow dramatically during the agreement period despite very low assignment in one or more benchmark years. The alternative cap is also anticipated to generate savings from ACOs that would have otherwise changed composition during the agreement period and exhibited reduced assignment in 1 or more benchmark years in ways that could have produced excessive shared savings payments due to random variation. The annual and 10-year total projections for these provisions are detailed in Table D-B12. [GRAPHIC] [TIFF OMITTED] TR05NO25.182

The remaining changes to the Shared Savings Program regulations, as described in section VI.A.2.e. of this final rule, are not estimated to have an impact on program spending at the aggregate level.

The combined impacts for all Shared Savings Program provisions are shown in Table D-B13. Because estimates are

rounded to the nearest $10 million, and because the percentiles are independently sorted for each year and for the 10-year totals, the annual estimates may not sum to exactly match the total 10-year estimates. [GRAPHIC] [TIFF OMITTED] TR05NO25.183