Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems; Quality Reporting Programs; Overall Hospital Quality Star Rating; Hospital Price Transparency; and Notice of Closure of a Teaching Hospital and Opportunity To Apply for Available Slots

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 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 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 designate 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 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 Medicare review contractors 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 proposed 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 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 discussed in the CY 2026 OPPS/ASC proposed rule and later in this section, we have come to believe with greater certainty that, since the IPO list was established, there have been 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 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, 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 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. 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, we stated in the CY 2026 OPPS/ASC proposed rule that 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 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 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, as stated in the CY 2026 OPPS/ASC proposed rule, 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 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 Sec. 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 proposed to eliminate the IPO list over a 3-year transition period, beginning in CY 2026. We also proposed eliminating the criteria for removing procedures from the IPO list currently codified at Sec. 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 proposed to transition services off the IPO list over a 3-year period, with the list completely eliminated by CY 2029. In accordance with this proposal, we proposed to amend Sec. 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 list eliminated in its entirety by January 1, 2029.

For CY 2026, we proposed 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 stated in the CY 2026 OPPS/APS proposed rule that 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 2021. These trends suggest a shift in musculoskeletal services from inpatient to outpatient settings.\130\

\130\ https://www.medpac.gov/wp-content/uploads/2023/03/Mar23_MedPAC_Report_To_Congress_SEC.pdf.

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 resource cost and assigned them to these C-APCs, these APCs generally describe appropriate ranges and placements for these musculoskeletal codes proposed for removal in CY 2026, which will allow for appropriate payment. As discussed in section III.E.3. of the CY 2026 OPPS/ASC proposed rule, we also proposed 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 with comment period. 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. In the CY 2023 OPPS/ASC final rule with comment period, we removed 11 more musculoskeletal services from the IPO list. As we explained in the CY 2026 OPPS/ASC proposed rule, 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 identified 285 mostly musculoskeletal services that we proposed 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 proposed to remove from the IPO list for CY 2026 and subsequent years, including the CPT/HCPCS codes, long descriptors, and the proposed CY 2026 payment indicators, are included in Table 69 of the CY 2026 OPPS/ASC proposed rule. These services and their proposed status indicators and APC assignments (if applicable) are included in Addendum B of the CY 2026 OPPS/ASC proposed rule. The complete list of codes that describe services that were proposed to be paid by Medicare in CY 2026 as inpatient only services is included as Addendum E to the CY 2026 OPPS/ASC proposed rule, which is available on the CMS website.\131\

\131\ In this rulemaking, we proposed 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://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Many commenters supported our proposal to eliminate the IPO list and defer to physicians' judgment on site of service determinations. These commenters stated that CMS' proposal would provide patients with greater flexibility to receive affordable care and allows for more patient-centered care. The commenters also believed the proposed change could potentially decrease overall healthcare costs and improve clinical outcomes for patients. Some commenters stated that there is no clinical difference between a surgery performed in an inpatient setting and an outpatient setting, and that eliminating the IPO list would create more flexibility for physicians and beneficiaries. These commenters also stated that there were already safeguards in place to ensure patient safety, such as State and local regulations, hospital conditions of participation (CoPs), and quality and monitoring initiatives. We also received comments in support of the removal of several specific codes from the IPO list for CY 2026, stating that these procedures can be or are already being performed safely in the outpatient setting.

Response: We thank the commenters for their support.

Comment: Numerous commenters, including hospital associations and systems, opposed the elimination of the IPO list due to patient safety concerns, stating that the IPO list serves as an important programmatic safeguard. These commenters stated that high-risk, invasive procedures that require post-operative monitoring that are currently included on the IPO list would not be safe to perform on Medicare beneficiaries in the outpatient setting. Additionally, commenters stated that there are several procedures on the IPO list that could never be performed in the outpatient setting, due to the complexity or need for postoperative inpatient care. Commenters were also concerned that we were removing services from the IPO list without data or literature to support that these could be safely performed in the outpatient setting and that there was not an evidence-based review process to determine which procedures to remove from the IPO list. These commenters requested that CMS maintain its current process and criteria for evaluating and removing procedures from the IPO list through rulemaking.

Response: We thank the commenters for their input. As we previously stated in the CY 2021 OPPS/ASC final rule with comment period (85 FR 86087), we continue to believe that physicians can and should use their clinical knowledge and judgment to appropriately determine whether a procedure can be performed in a hospital outpatient setting or whether inpatient care is required for the beneficiary based on the beneficiary's specific needs and preferences, subject to the general coverage rules requiring that any procedure be reasonable and necessary, and that payment should be made pursuant to the otherwise applicable payment policies. We believe that patient safety and quality of care will be safeguarded by the physician's assessment of the risk of a procedure or service to the individual beneficiary and their selection of the most appropriate setting of care based on this risk, in addition to State and local licensure requirements, accreditation requirements, hospital conditions of participation (CoPs), medical malpractice laws, and CMS quality and monitoring initiatives and programs. In addition, as we have stated in previous rulemaking (82 FR 59384; 84 FR 61354), the removal of a service from the IPO list does not require the service to be performed only on an outpatient basis. Rather, it allows for payment under the OPPS when the service is performed in an outpatient setting. Services that are removed from the IPO list can be and are performed on individuals who are admitted as inpatients (as well as individuals who are registered hospital outpatients), based on the physician's clinical knowledge and judgment. We also continue to believe that there have been significant developments in the practice of medicine that have allowed numerous services that were previously provided on an inpatient basis to now be provided safely and effectively in the outpatient setting. Therefore, at this time, we do not believe it is necessary for CMS to maintain an IPO list, nor do we currently believe that it is necessary to require specific HCPCS codes to remain payable only when furnished in the inpatient setting.

Comment: Some commenters were also concerned about the financial impact and administrative burden that this proposal would have on hospitals. Commenters had concerns that eliminating the IPO list could push healthier and less complex patients into outpatient settings, skewing the inpatient population to become a higher percentage of more complex patients that the existing MS-DRG reimbursement rates would not accurately cover. A few commenters also expressed concerns on the impact of this proposal on payment for Graduate Medical Education (GME) if inpatient stays and procedures decrease. Many commenters were also concerned with the potential burden of increased claim denials for inpatient claims for procedures that are no longer on the IPO list, along with potential breakdowns in the current administrative and pre- operative workflow for current inpatient-only procedures. Many commenters also shared concerns that physicians may be pressured by hospital administrations and commercial payors to perform formerly IPO procedures in lower cost settings, instead of prioritizing patient safety.

Response: As stated previously, we have repeatedly recognized 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 on the general coverage rules

requiring that any procedure be reasonable and necessary. We continue to believe that deference should be given to physicians and medical professionals in these determinations. In accordance with section 1801 of the Act, we do not control or supervise the practice of medicine or the manner in which medical services are provided. We also reiterate that we do not require services that are no longer included on the IPO list to be performed solely in the outpatient setting and that, following elimination of the IPO list, services that were previously identified as inpatient only can continue to be performed in the inpatient setting. It is not CMS' policy to require services that are removed from the IPO list to be performed only in the outpatient setting. Instead, we aim to offer providers enhanced flexibility and choice in determining the safest, most efficient setting of care for Medicare beneficiaries, whether that is the inpatient or outpatient setting. It would be a misinterpretation of CMS payment policy for providers to create policies or guidelines that establish the outpatient setting as the baseline or default site of service for a procedure based on its removal from the IPO list or the elimination of the IPO list. As stated in previous rulemaking (84 FR 61354; 82 FR 59384; 81 FR 79697), services that are no longer included on the IPO list are payable in either the inpatient or outpatient setting subject to the general coverage rules requiring that any procedure be reasonable and necessary, and payment should be made pursuant to the otherwise applicable payment policies.

We believe there are sufficient guardrails, including State and local regulations, hospital CoPs, accreditation requirements, and medical malpractice laws, to ensure that physicians are able to prioritize patient safety when determining the site of service. In regard to concerns about increased administrative burden due to inpatient claims denials, as discussed below and in section X.D. of this final rule with comment period, we are continuing 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. Regarding changes made by commercial insurance providers and site selection for outpatient services as a result of CMS eliminating the IPO list, while we believe that these comments are outside the scope of the OPPS/ASC proposed rule, we note that commercial providers establish their own rules regarding payment for services.

Comment: Multiple commenters requested, if CMS finalizes the proposal to eliminate the IPO list, that CMS provides guidance on the patient selection criteria, including clinical and social factors, for determining the appropriate site of service for procedures removed from the IPO list. Commenters also recommended that CMS monitor the safety impacts and surgical outcomes of moving procedures off the IPO list, including surgical complications and hospital readmissions.

Response: We thank the commenters for their feedback. As we have previously stated (86 FR 63675), we note the balance between several factors on this important issue, namely, the prohibition on CMS interfering with the practice of medicine in Section 1801 of the Act, the need to provide clear information about CMS billing and payment rules that ensure hospitals, physicians, and other interested parties can understand and operate within them, and our belief that the specific decision about 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.

We also thank the commenters for their recommendations on monitoring safety data related to the elimination of the IPO list. We would welcome and use any patient outcomes data, analyses, or recommendations that interested parties would like to share with us to help inform IPO decision-making going forward. We will take these recommendations into consideration for future rulemaking and are open to receiving any relevant data in the interim.

Comment: We received comments requesting that we assign services newly removed from the IPO list to New Technology APCs until sufficient data is collected to assign these services to clinical APCs. One commenter suggested that we make an appropriate New Technology APC assignment for their technology based upon inpatient charges converted to cost and then maintain the APC assignment for at least two years. We also received comments with alternative methodologies for making APC assignment determinations, including crosswalking procedures to ICD-10- PCS codes and using IPPS claims with shorts stays to calculate payment rates.

Response: We thank the commenters for their input. As we previously stated in the CY 2021 OPPS/ASC final rule with comment period (85 FR 86093), consistent with our regulation at 42 CFR 419.31(a)(1), we classify outpatient services and procedures that are comparable clinically and in terms of resource use into APC groups. As we stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74224), the OPPS is a prospective payment system that provides payment for groups of services that share clinical and resource use characteristics. It should be noted that for all codes newly paid under the OPPS, including codes removed from the IPO list, our policy has been to assign the service or procedure to an APC based on feedback from a variety of sources, including but not limited to, review of the clinical similarity of the service to existing procedures; advice from CMS medical advisors; information from interested specialty societies; and review of all other information available to us, including information provided to us by the public, whether through meetings with interested parties or additional information that is mailed or otherwise communicated to us (84 FR 61229). Therefore, we believe assigning procedures removed from the IPO list to existing clinical APCs that are similar in clinical characteristics and resource costs is appropriate. We note that procedures assigned to New Technology APCs cannot be placed in clinical APCs due to insufficient clinical and cost data, unlike the procedures that are transitioning from the IPO list.

While we disagree with assigning these procedures to New Technology APCs at this time, we will take commenters' suggestions regarding alternative methodologies for assigning former IPO procedures to clinical APCs under consideration for future rulemaking.

Comment: Commenters disagree with certain proposed APC assignments for procedures proposed to be removed from the IPO list and stated that CMS did not provide sufficient detail as to how the proposed APC placements were determined. Some commenters also believed that the proposed APC payments did not adequately reflect the resource costs associated with providing the procedure in the outpatient setting. We received the following APC reassignment requests:

Reassign CPT codes 0202T, 22610, 22800, 22802, 22808, and 27703 to APC 5117 (Level 7 Musculoskeletal Procedures).

Reassign CPT codes 23474, 27132, 27134, 27137, 27138, 27450, 27486, 27487 to APC 5116 (Level 6 Musculoskeletal Procedures).

Reassign CPT codes 23334, 23335, 27236, 27244, 27245, 27248, 27254, 27269, 27450, 27506, 27507, 27511, 27513, 27514, 27535, 27536, and 27540 to APC 5115 (Level 5 Musculoskeletal Procedures).

Reassign CPT codes G0413, G0414, and G0415 to APC 5114 (Level 4 Musculoskeletal Procedures) or higher.

Reassign CPT code 61624 to APC 1577 (New Technology--Level 40 ($20,001-$25,000)).

Reassign CPT code 37182 to APC 5194 (Level 4 Endovascular Procedures) or 1576 (New Technology--Level 39 ($15,001-$20,000)).

Response: As we have previously stated, 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 by reviewing the MS-DRG rate for the service under the IPPS, though we note 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. After further clinical review and review of the limited available claims data for these procedures, we believe that we have appropriately assigned the codes in the APC reassignment requests listed above, with the exception of the following updates:

We are reassigning CPT codes 23334 and 23335 from APC 5073 (Level 3 Excision/Biopsy/Incision and Drainage) to APC 5114 (Level 4 Musculoskeletal Procedures).

We are reassigning CPT code 27254 from APC 5113 (Level 3 Musculoskeletal Procedures) to APC 5114 (Level 4 Musculoskeletal Procedures).

We are reassigning CPT code 27487 from APC 5115 (Level 5 Musculoskeletal Procedures) to APC 5116 (Level 6 Musculoskeletal Procedures).

We are reassigning CPT codes 27511, 27513, and 27514 from APC 5114 (Level 4 Musculoskeletal Procedures) to APC 5115 (Level 5 Musculoskeletal Procedures).

We are reassigning CPT code 37182 from APC 5193 (Level 3 Endovascular Procedures) to APC 5194 (Level 4 Endovascular Procedures).

Final APC assignments, status indicator assignments, and long descriptors for all procedures removed from the IPO list for CY 2026 can be found in Table 119.

Comment: Numerous commenters raised concerns about the impact of the elimination of the IPO list on the 3-day stay requirement for skilled nursing facility (SNF) care. By statute, beneficiaries must have a prior inpatient hospital stay of no fewer than three consecutive days to be eligible for Medicare coverage of inpatient SNF care. Commenters expressed concerns that the elimination of the IPO list may have a significant impact on Medicare beneficiaries' ability to satisfy the 3-day inpatient stay requirement to qualify for SNF care.

Response: While we believe that these comments are outside the scope of the OPPS/ASC proposed rule, we reiterate that removal of procedures from the IPO list does not require the procedures to be performed only on an outpatient basis. Removal of procedures from the IPO list allows for payment of the procedure in either the inpatient setting or the outpatient setting. A prior 3-day inpatient hospital stay remains a statutory requirement for SNF coverage. As stated in the CY 2018 final rule with comment period (82 FR 59384), in our discussion of the removal of TKA from the IPO list, we stated that we would expect that those Medicare beneficiaries identified as appropriate candidates to receive a surgical procedure in the outpatient setting would not be expected to require SNF care following surgery. Instead, we expect that these beneficiaries would be appropriate for discharge to home (with outpatient therapy) or home health care. Therefore, we do not anticipate that Medicare beneficiaries receiving the procedures we are proposing to remove from the IPO list for CY 2026 in the outpatient setting would require SNF care following the procedure.

Comment: We received comments regarding the potential impact of eliminating the IPO list on our transitional device pass-through policy. One commenter requested clarification on if devices associated with procedures removed from the IPO list would be eligible for device pass-through status. Other commenters requested that CMS reinstate certain expired device category codes, arguing that associated procedures being on the IPO list created a “verifiable delay in U.S. market availability” for these devices as referenced in Sec. 419.66(b)(1) for the outpatient hospital setting.

Response: We thank the commenters for their feedback. Devices that are reported only with codes that are removed from the IPO list will not be precluded from applying for or receiving transitional device pass-through payment status. However, we note that all devices must meet the eligibility criteria described in Sec. 419.66 to be eligible for transitional device pass-through payment status, including the requirement that the pass-through payment application must be submitted within 3 years from the date of the initial FDA marketing authorization. We do not believe that an IPO designation for procedures associated with devices creates a “verifiable delay in U.S. market availability” for these devices as referenced in Sec. 419.66(b)(1), because these devices have been available on the market, even if the associated procedures have not been performed, or the associated procedures are performed in low volumes in the outpatient setting. We do not believe the elimination of the IPO list warrants changes to our device pass-through policy. We also do not agree with commenters' suggestions to reinstate device pass-through payment status for certain device codes due to procedures being removed from the IPO list because. consistent with section 1833(t)(6)(B)(iii) of the Act and 42 CFR 419.66(g), the period for which a device category for transitional pass-through payments under the OPPS can be in effect is at least 2 years, but not more than 3 years, beginning on the first date on which pass-through payment is made. Once 3 years has passed since a device category first received transitional pass-through payments, the device category is no longer eligible for pass-through payments, and we utilize the established policy (67 FR 66763) to package the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates. We note that device pass- through payment status is intended to be temporary, and we consider the cost data to be included in the payment rates regardless of whether the technology's use in the Medicare population has been frequent or infrequent during the time period under which a device was receiving transitional pass-through payments. We cannot reinstate the pass- through payment status of expired device category codes where reinstatement would make the pass-through payment status effective longer than the maximum 3-year period permitted under section 1833(t)(6)(B)(iii) of the Act and Sec. 419.66(g). 3. Effect on Beneficiary Cost-Sharing

As noted in the CY 2021 OPPS/ASC final rule with comment period, 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 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, as we stated in the CY 2026 OPPS/ASC proposed rule, 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 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 copayments, please refer to section II.I. of this final rule with comment period.

Comment: We received one comment that expressed concern about the potential for increased beneficiary cost-sharing when complex procedures are performed in outpatient settings. The commenter stated that beneficiaries may still face unexpected financial burdens, particularly if multiple services are required or complications arise.

Response: As stated previously, services included on the IPO list tend to be surgical procedures that, if performed on an outpatient basis, 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. In most instances, we expect that beneficiaries will not be responsible for multiple copayments for individual ancillary services associated with services removed from the IPO list, because the primary service will be assigned to a C-APC and the inpatient deductible cap will apply to the entire hospital claim, which is paid as a comprehensive service. The majority of procedures being removed from the IPO list for CY 2026 are assigned to C-APCs or packaged into payment for other services, which will result in beneficiaries paying one copayment amount. Therefore, we do not believe that beneficiaries will be significantly impacted through increased cost sharing for services that were removed from the IPO list and are furnished in the hospital outpatient department setting.

Also, as stated previously, in the event there are separately payable OPPS services included on a claim with a service assigned to a C-APC, OPPS cost-sharing for an individual service is capped at the applicable Part A hospital inpatient deductible amount for that year for each service. 4. Exemption From Certain Medical Review Activities for Services Removed From the IPO List

To further address concerns from interested parties, we proposed 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 proposed 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 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 proposed 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 also sought comment on whether other exemption periods may be more warranted. For more information on the 2-midnight rule and comment responses, please refer to section X.D. of this final rule with comment period.

As stated in the CY 2026 OPPS/ASC 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' 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 proposed 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 with comment period (85 FR 86118). Therefore, given CMS' 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 stated in the CY 2026 OPPS/ASC proposed rule that we now believe that quality of care is unlikely to be negatively affected by the elimination of the IPO list. However, we requested that commenters submit evidence on what effect, if any, they believe eliminating

the IPO list may have on the quality of care.

We received several comments on our proposal 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. Please refer to section X.D. of this final rule with comment period for a summary of these comments and our responses. 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 proposed to eliminate the current IPO list of 1,731 services, starting with the 285 mostly musculoskeletal-related services as provided in Table 69 of the CY 2026 OPPS/ASC proposed rule. We requested 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 sought 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. As discussed in section III.E.3. of the CY 2026 OPPS/ASC proposed rule, we proposed to establish a 7 level Musculoskeletal Procedures APC series for CY 2026.

Comment: A few commenters supported the 3-year transition period, stating that it would give hospitals and physicians sufficient time to adjust.

Response: We thank the commenters for their support.

Comment: A few commenters disagreed with our 3-year transition period. Some commenters recommended that we proceed with the elimination of the IPO list at a slower pace, with a few commenters recommending at least 4 years. One commenter recommended we proceed with eliminating the IPO list in total, stating that a transition over multiple years could cause confusion regarding which procedures have or have not been removed.

Response: We thank the commenters for their feedback. We continue to believe, as discussed previously, that gradually removing services from the IPO list over the 3-year phase-out period will allow for adequate time for providers 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.

Comment: One commenter recommended that CMS remove CPT codes 58548 (Laparoscopy, surgical, with radical hysterectomy, with bilateral total pelvic lymphadenectomy and para-aortic lymph node sampling (biopsy), with removal of tube(s) and ovary(s), if performed) and 58575 (Laparoscopy, surgical, total hysterectomy for resection of malignancy (tumor debulking), with omentectomy including salpingo-oophorectomy, unilateral or bilateral, when performed) from the IPO list for CY 2026, stating that they are safe to perform in outpatient settings.

Response: We thank the commenter for their suggestion. We will take this into consideration in future rulemaking.

Comment: Some commenters suggested that we review procedures on the IPO list for procedures that have claims data that show a high volume of 1-2 day stays and remove those procedures first. One commenter requested that we wait to remove certain invasive procedures involving a craniectomy, craniotomy, and/or burr holes until the last phase. Another commenter recommended that we remove cardiovascular procedures during the last phase.

Response: We thank the commenters for their suggestions. We will take these into consideration in future rulemaking.

Comment: Several commenters expressed support for our proposal to create a Level 7 Musculoskeletal APC. A few of those commenters requested that we continue to review those APCs for cost and clinical homogeneity, and the need for additional APCs.

Response: We appreciate the commenters' support. After consideration of the public comments, we are finalizing our proposal to create a Level 7 Musculoskeletal APC. We note that we will continue to monitor the APC series as updated claims data continues to be available. The complete list of codes assigned to APC 5117 (Level 7 Musculoskeletal Procedures) can be found in Addendum B of this final rule with comment period, which is available on the CMS website. 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 proposed to eliminate the codified criteria for removing procedures from the IPO list at Sec. 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, as we noted in the CY 2026 OPPS/ASC proposed rule, 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 acknowledged that some commenters may disagree with our proposed approach to the IPO list. Therefore, we wished to consider other methods to provide greater deference to the medical judgment of clinicians besides eliminating the IPO list completely. We solicited 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.

Comment: We received comments that requested, as an alternative to removing the five criteria at Sec. 419.23(b), that CMS establish criteria that factor in clinical and social factors, such as comorbidities, age, and home support. Some commenters suggested updating the criteria to allow for a smaller version of the IPO list or to maintain a shortened list with just procedures that would never be performed in the outpatient setting, such as organ transplants. Some commenters suggested that instead of eliminating the IPO list, CMS instead provide a process to allow physicians to override the IPO designation in certain situations.

Response: We will take this into consideration in future rulemaking. 7. Summary of IPO List Changes

In summary, and after consideration of the comments received, given recent developments in surgical technique and technological advances in the practice of medicine, innovations in infection control and site of service shifts to the outpatient setting spurred by the COVID-19 PHE, as well as the various safeguards discussed previously in this section, we finalize eliminating 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 119, for CY 2026. We finalize our proposal eliminating the criteria for removing procedures from the IPO list currently codified at Sec. 419.23, as a conforming change. We are also finalizing amending Sec. 419.22(n) to state that, effective 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, 2028. We believe that there are a number of safety mechanisms that will 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.

The services removed from the IPO list for CY 2026 and their final status indicators and APC assignments (if applicable) are included in Addendum B of this final rule with comment period, which is available on the CMS website. The complete list of codes that describe services that are finalized to be paid by Medicare in CY 2026 as inpatient only services is included as Addendum E to this CY 2026 OPPS/ASC final rule with comment period, which is available on the CMS website. BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59004 through 59014), we adopted a method to control unnecessary increases in the volume of clinic visit services furnished in excepted off-campus provider-based departments (PBDs). We refer readers to the CY 2019 OPPS/ASC final rule with comment period for a detailed discussion of the background, legislative provisions, and payment policies we developed to address increases in the volume of covered outpatient department (OPD) services. Below we discuss the policy we finalized in the CY 2019 OPPS/ASC final rule with comment period and its application under the OPPS for CY 2020 and subsequent years.

In the CY 2019 OPPS/ASC final rule with comment period, we finalized a policy to use 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. We applied an amount equal to the site-specific Medicare Physician Fee Schedule (PFS) payment rate for nonexcepted items and services furnished by a nonexcepted off-campus PBD (the PFS 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 (departments that bill the modifier “PO” on claim lines). However, we phased in the application of the reduction in payment for the clinic visit service described by HCPCS code G0463 in the excepted provider-based department setting over 2 years. For CY 2019, the payment reduction was phased-in by applying 50 percent of the total reduction in payment that would have applied if these departments were paid the site-specific PFS rate for the clinic visit service. The PFS equivalent rate was 40 percent of the OPPS payment for CY 2019 (that is, 60 percent less than the OPPS rate). We provided for a 2-year phase-in of this policy under which one-half of the total 60 percent payment reduction (a 30 percent reduction) was applied in CY 2019. These departments were paid approximately 70 percent of the OPPS rate (100 percent of the OPPS rate minus the 30 percent payment reduction that was applied in CY 2019) for the clinic visit service in CY 2019.

For CY 2020, the second year of the 2-year phase-in, we stated that we would apply the total reduction in payment that is applied if these departments (departments that bill the modifier “PO” on claims lines) are paid the site specific PFS rate for the clinic visit service described by HCPCS code G0463. For CY 2020 and subsequent years, the PFS-equivalent rate was 40 percent of the proposed OPPS payment (that is, 60 percent less than the OPPS rate).

In addition, as we stated in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58818), we implemented this policy in a non- budget neutral manner. We did so to ensure that our method for controlling the unnecessary growth in the volume of clinic visits furnished by excepted off-campus PBDs does not simply increase other unnecessary expenditures within the OPPS, thus driving different utilization-distorting decisions.

In the CY 2023 OPPS/ASC final rule with comment period (87 FR 71748), we finalized a policy which provided that 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 Physician Fee Schedule- 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 2024 and CY 2025, we continued to exempt excepted off-campus PBDs of rural SCHs from the clinic visit payment policy.

We noted in the CY 2026 OPPS/ASC proposed rule that we continued to believe that section 1833(t)(2)(F) of the Act provides authority to implement this policy. The U.S. Court of Appeals for the District of Columbia Circuit held in American Hospital Association v. Azar that a service-specific, non-budget-neutral reduction of the reimbursement rate for OPD services “qualifies as a `method for controlling unnecessary increases in the volume of covered [outpatient] services' ” under that provision. 964 F.3d 1230, 1245 (D.C. Cir. 2020) (quoting 42 U.S.C. 1395l(t)(2)(F)). The D.C. Circuit reasoned in part that “[t]he lower the reimbursement rate for a service, the less the incentive to provide it, all else being equal[,]” and “[r]educing particular the reimbursement rate . . . is naturally suited to addressing unnecessary increases in the overall volume of a service provided by hospitals.” Id. at 1241. It ultimately concluded that the policy “falls comfortably within the plain text” of section 1833(t)(2)(F) of the Act, id. at 1241, “and `fits the design of the statute as a whole and its object and policy,' ” id. at 45 (quoting Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 418 (1993)). We noted in the CY 2026 OPPS/ASC proposed rule that we continued to believe that our interpretation of the Act was the best one, and that this policy falls well within the Act's delegation to the Secretary to “develop a method for controlling unnecessary increases in the volume of covered OPD services”. 2. Expanding the Method To Control Unnecessary Increases in the Volume of Outpatient Services Furnished in Excepted Off-Campus Provider-Based Departments

As described in the CY 2019 OPPS/ASC final rule with comment period, we previously found that earlier rulemaking efforts were insufficient to control the unnecessary growth of certain covered OPD services and as a result we implemented a method to control for unnecessary growth in covered OPD services by adjusting the payment rate for clinic visits in excepted off-campus PBDs to be at the PFS- equivalent rate rather than the higher OPPS rate. While this regulatory change had a positive impact, we noted in CY 2026 OPPS/ASC proposed rule that there is evidence of continued growth in the volume of OPD services driven by site of service payment differentials rather than clinical need. We continued to be concerned that beneficiaries are being driven into a higher cost setting of care because of financial incentives when they could safely receive care in a lower cost setting. This creates greater financial burden both for Medicare and for the beneficiary in the form of increased coinsurance. Volume increases that seek to take advantage of financial incentives created by payment policy rather than clinical need are unnecessary and therefore warrant policy changes to halt and address these increases. As the D.C. Circuit explained, “[i]t is reasonable to think that Congress . . . would have wanted the agency to avoid causing unnecessary volume growth with its own reimbursement practices”. Am. Hosp. Ass'n, 964 F.3d at 1245. Accordingly, we proposed to remove this differential for drug administration services delivered in excepted PBDs.

Many healthcare services can be performed in multiple settings. Even when there is little variation in the service provided across settings, the Medicare Trust Fund and Medicare beneficiaries typically pay more when that service is performed in an OPD than when the same service is performed in a physician office. That payment differential creates an incentive for providers to shift the care of beneficiaries to an OPD rather than a physician office or ASC, even if the services can be safely performed in the physician office or an ASC. Generally, 20 percent of any increased payment is the responsibility of the beneficiary in the form of coinsurance. Taking into account that any payment differential occurs across millions of claims for drug administration and other services each year, this threatens to create a significant source of unnecessary spending both by Medicare beneficiaries in the form of unnecessarily high copayments and by Medicare in the form of unnecessarily high Medicare payments for services that can be performed safely in a different setting.

In the CY 2019 OPPS/ASC final rule with comment period, we discussed vertical consolidation and the practice of hospitals purchasing freestanding physician practices and converting the billing from the PFS to higher paying OPD visits. These conversions shift market share from freestanding physician offices to OPDs. We stated that we believed there was a correlation among the increasing volume of OPD clinic visits, vertical integration, and the higher OPPS payment rates for clinic visits. More favorable reimbursement for hospital- owned sites compared to physician-owned sites has been shown to encourage hospitals' acquisition of physician practices.132 133 Once a practice is acquired and designated as an outpatient department, physician services can be billed at higher hospital-based rates. This type of consolidation has been associated with higher Medicare spending and more intense treatment patterns.134 135 136 The impact of vertical integration and the increases in volume of outpatient services extends beyond just the clinic visit. In the CY 2019 OPPS/ASC final rule with comment period, we cited our concern that beneficiaries receiving chemotherapy administration, a high-volume service within the drug administration APC family, receive more sessions on average when treated in the OPD. Chemotherapy days per beneficiary were an estimated 9 to 12 percent higher in the hospital outpatient department than the physician office setting.\137\ From 2003-2015 the rate of hospital or health system ownership of cancer care practices doubled from about 30 percent to about 60 percent.\138\ For some drug administration services for cancer care, provider consolidation increases the cost of outpatient chemotherapy treatment.\139\

\132\ https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.0830.

\133\ https://onlinelibrary.wiley.com/doi/10.1111/1475-6773.13613.

\134\ https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2463591.

\135\ https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.01183.

\136\ https://onlinelibrary.wiley.com/doi/10.1111/1475-6773.14172.

\137\ https://www.siteneutral.org/wp-content/uploads/2016/06/14_USON-Moran-Report-08272013.pdf.

\138\ https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.0830.

\139\ https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.0830.

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 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 almost three times 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.\140\

\140\ https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_Ch8_MedPAC_Report_To_Congress_SEC.pdf.

We are not aware of any clinical or other substantive change in the services provided that would have led to these increases in the share of these services furnished in OPDs, as opposed to in other settings. Thus, we noted in the CY 2026 OPPS/ASC proposed rule that we believed that these changes are in large part a result of financial incentives and therefore represent unnecessary increases in the volume of OPD services.

We stated in the CY 2026 OPPS/ASC proposed rule that 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 also stated that we believe that this problem is pervasive and exists across a number of services. 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 potentially represents unnecessary utilization of the OPD setting. In CY 2019, we chose to start tackling this problem by addressing 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 proposed to address drug administration services provided at excepted PBDs a bit more generally. We proposed 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.

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 proposed in the CY 2026 OPPS/ASC 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 analyzed several families of services paid under the OPPS and presented our findings on the utilization and payment of drug administration services, which we discuss in the later in this section. 3. Utilization of Drug Administration Services

The high volume of drug administration services and the fact that Medicare pays approximately 200-300 percent more for the administration of drugs in the OPD setting than in the physician office setting incentivizes providers to migrate this family of services to the OPD setting.

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 process of administering 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 final rule with comment period.

We evaluated the growth in volume and spending for multiple families of 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 the volume of services paid through the drug administration APCs (5691-5694) has increased over time, which would indicate that these services have migrated to the OPD setting. Specifically, 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 (BBA) starting in 2017. The growth also persisted after the COVID-19 Public Health Emergency (PHE). Between 2018 and 2024 the number of beneficiaries enrolled in fee-for-service Medicare decreased by over 14 percent.\141\ But since 2020 we have simultaneously seen increases in the volume of drug administration services provided in OPDs utilized per beneficiary.\142\ Between 2020 and 2023 the utilization of drug administration services grew per beneficiary by over 30 percent. That means that while there are now fewer Medicare fee-for-service beneficiaries than there were prior to the COVID-19 PHE, each beneficiary on average receives more drug administration services in the OPD setting than they were prior to the COVID-19 PHE. There was also growth prior to the COVID-19 PHE. The utilization of drug administration services per beneficiary also grew by 30 percent between 2011 and 2019.

\141\ https://data.cms.gov/summary-statistics-on-beneficiary-enrollment/medicare-and-medicaid-reports/medicare-monthly-enrollment.

\142\ Based on our analysis of claims data and Medicare FFS enrollment.

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 particularly significant growth. As we stated earlier, 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 2023.\143\ 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 186 percent more expensive in the OPD than in the physician office. We concluded 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 more generally in volume by 64 percent in the OPPS between 2011 and 2023.\144\ 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.\145\ We concluded 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.

\143\ Based on our analysis of claims data.

\144\ 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.

\145\ https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_Ch8_MedPAC_Report_To_Congress_SEC.pdf.

We were 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 sharing than they would had they received the same treatments at freestanding facilities or non-excepted off-campus PBDs.\146\ 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 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 off- campus OPDs, cost sharing would have been $1,055 lower per patient if payments had been site neutral”.\147\

\146\ https://craftmediabucket.s3.amazonaws.com/uploads/Drug-Admin-Off-Campus-Site-Neutrality-2023.10.18.pdf.

\147\ https://craftmediabucket.s3.amazonaws.com/uploads/Drug-Admin-Off-Campus-Site-Neutrality-2023.10.18.pdf.

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 in 2023, 68 percent of drug administration services occurred in physician offices, indicating that they are (and can be) safely performed in multiple settings.\148\ 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 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 believed 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 outpatient setting because of payment differentials that result in the unnecessary consumption of OPD services.

\148\ https://craftmediabucket.s3.amazonaws.com/uploads/Drug-Admin-Off-Campus-Site-Neutrality-2023.10.18.pdf.

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 believed 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 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 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.\149\ In the CY 2026 OPPS proposed rule (90 FR 33476), to better understand the migration of services in 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 of the BBA (departments that bill the modifier “PN”), are the same with slight variations in the order based on volume. We knew that the overwhelming majority of HCPCS codes in the drug administration APCs were being billed with both the “PO” and “PN” modifiers. Meaning that these drug administration services were being provided in both excepted and non-excepted PBDs. That indicates that the payment rate in non-excepted PBDs is sufficient and can support 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.

\149\ https://www.federalregister.gov/documents/2018/11/21/2018-24243/medicare-program-changes-to-hospital-outpatient-prospective-payment-and-ambulatory-surgical-center.

We concluded that the differential in our payment rates had created a payment incentive that had 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 considered 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 routinely receiving services in the higher paid setting due to payment incentives. We believed 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 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.150 151 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.\152\ 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 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.

\150\ https://tobin.yale.edu/sites/default/files/2023-10/Site-Neutral%20Payment%20Literature%20Review%2010302023.pdf.

\151\ https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_Ch8_MedPAC_Report_To_Congress_SEC.pdf.

\152\ https://tobin.yale.edu/sites/default/files/2023-10/Site-Neutral%20Payment%20Literature%20Review%2010302023.pdf.