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

Our concern with unnecessary increases in the volume of drug administration services was tied to the health and sustainability of the OPPS. In the CY 2019 OPPS/ASC final rule with comment period, we found that the mean and median annual increase in the volume and intensity of hospital outpatient services was about 5.5 percent and 5.4 percent, respectively, from 2011 to 2019. During this time period, the estimated increase in aggregate annual hospital reimbursements incurred through Medicare Fee for Service (FFS) Part B was $28.2 billion.\153\ As stated in the CY 2026 OPPS/ASC proposed rule (90 FR 33476) and in Table 120, we projected that between 2019 and 2027, the cost of outpatient hospital services per FFS enrollee would grow at a mean of about 7.3 percent per year and a median of 8.1 percent per year. This accounts for a $27.2 billion increase in aggregate annual incurred reimbursements for hospitals in FFS Part B during that time, far exceeding the growth of other categories of Part B services in FFS in dollar terms.\154\

\153\ Available in Table IV.B6. at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2019.pdf.

\154\ Available in Tables IV.B3. and B6 at https://www.cms.gov/oact/tr/2024.

[GRAPHIC] [TIFF OMITTED] TR25NO25.174

There was evidence that increased volume and intensity of certain covered OPD services was likely driven by financial incentives to furnish services in hospitals in order to receive higher reimbursement, rather than making site-of-service decisions based on medical necessity. The OPPS was originally designed to manage Medicare spending growth by replacing a cost-based system with a prospective payment system. Contrary to this Congressional purpose, the OPPS had continued to be the one of the fastest growing sectors of Medicare payments out of all payment systems under Medicare Parts A and B.\156\ Furthermore, we were concerned that the persistent rate of growth relative to other payment systems suggests that payment incentives, rather than patient acuity or medical necessity, continue to affect site-of-service decision-making. This site-of-service selection had an impact on not only the Medicare program, but also on Medicare beneficiary out-of- pocket spending. Therefore, to the extent that there were lower-cost sites-of-service available, we continued to believe that beneficiaries and the physicians treating them should have that choice and not be encouraged to receive or provide care in higher paid settings solely for financial reasons. Our authority to implement volume control methods was an important tool in combating unnecessary OPPS utilization. We had seen success in stemming the unnecessary growth in the volume of off-campus clinic visits and believed off-campus drug administration services were in need of similar examination.

\155\ Available in Table IV.B3. at https://www.cms.gov/oact/tr/2024.

\156\ https://www.gpo.gov/fdsys/pkg/FR-2018-11-21/pdf/2018-24243.pdf.

Therefore, given the unnecessary increases in the volume of drug administration services in hospital outpatient departments, for the CY 2026 OPPS, we proposed to use our authority under section 1833(t)(2)(F) of the Act to apply an amount equal to the site-specific PFS payment rate for nonexcepted items and services furnished by a non-excepted off-campus PBD (the PFS payment rate) for any HPCPCs codes assigned to the drug administration services APCs, when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act (departments that bill the modifier “PO” on claim lines). Table 121 shows the specific APCs that we proposed to identify for this policy, which are APCs 5691-5694. Off-campus PBDs that are not excepted from section 603 of the BBA (departments that bill the modifier “PN”) already received a PFS- equivalent payment rate for any HCPCS codes assigned to the drug administration services APCs. Additionally, we noted that this proposal aligned with President Trump's Executive Order (E.O.) 14273, “Lowering Drug Prices by Once Again Putting Americans First”.\157\ Section 11 of the E.O., “Reducing Costly Care for Seniors”, directs the Secretary to “evaluate and, if appropriate and consistent with applicable law, proposed regulations to ensure that payment within the Medicare program is not encouraging a shift in drug administration volume away from less costly physician office settings to more expensive hospital outpatient departments”.

\157\ https://www.govinfo.gov/content/pkg/FR-2025-04-18/pdf/2025-06837.pdf. [GRAPHIC] [TIFF OMITTED] TR25NO25.175

We proposed to implement this proposed method to address the unnecessary increases in utilization of drug administration services in the OPD setting in a non-budget neutral manner, similar to the CY 2019 OPPS/ASC final rule with comment period approach to address unnecessary increases in utilization of clinic visits (83 FR 58818). We proposed to continue our interpretation that while section 1833(t)(9)(B) of the Act requires that

certain changes made under the OPPS be made in a budget neutral manner, this section does not apply to the volume control method under section 1833(t)(2)(F) of the Act. In particular, section 1833(t)(9)(A) of the Act, titled “Periodic review,” provides, in part, that the Secretary must annually review and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors” (emphasis added). Section 1833(t)(9)(B) of the Act, titled “Budget neutrality adjustment” provides that if “the Secretary makes adjustments under paragraph (A), then the adjustments for a year may not cause the estimated amount of expenditures under this part for the year to increase or decrease from the estimated amount of expenditures under this part that would have been made if the adjustments had not been made” (emphasis added). However, a volume-control method under section 1833(t)(2)(F) of the Act is not an “adjustment” under paragraph (2). Unlike the wage adjustment under section 1833(t)(2)(D) of the Act and the outlier, transitional pass-through, and equitable adjustments under section 1833(t)(2)(E) of the Act, section 1833(t)(2)(F) of the Act refers to a “method” for controlling unnecessary increases in the volume of covered OPD services, not an adjustment. Likewise, sections 1833(t)(2)(D) and (E) of the Act also explicitly require the adjustments authorized by those paragraphs to be budget neutral, while the volume control method authority at section 1833(t)(2)(F) of the Act does not. Therefore, the volume control method proposed under section 1833(t)(2)(F) of the Act is not one of the adjustments under section 1833(t)(2) of the Act that is referenced under section 1833(t)(9)(A) of the Act that must be included in the budget neutrality adjustment under section 1833(t)(9)(B) of the Act. Moreover, section 1833(t)(9)(C) of the Act specifies that if the Secretary determines under methodologies described in paragraph (2)(F) that the volume of services paid for under this subsection increased beyond amounts established through those methodologies, the Secretary may appropriately adjust the update to the conversion factor otherwise applicable in a subsequent year. We interpreted this provision to mean that the Secretary can implement a volume control method under section 1833(t)(2)(F) of the Act in a nonbudget neutral manner in the year in which the method is implemented, and that the Secretary may then make further adjustments to the conversion factor in a subsequent year to account for volume increases that are beyond the amounts estimated by the Secretary under the volume control method.

We stated in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58818) that we believed implementing a volume control method in a budget neutral manner would not appropriately reduce the overall unnecessary volume of covered OPD services, and instead would simply shift the movement of the volume within the OPPS system in the aggregate, a concern similar to the one we discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613). We believed that concern applies to drug administration services just the same. The estimated payment impact for various provider classifications is displayed in Table 167: Estimated Impact of the Final CY 2026 Changes for Services Provided in the Hospital Outpatient Prospective Payment System of this final rule with comment period. The 10-year estimated impact of this policy is displayed in Table 166: Estimated Effect of Changes to Drug Administration Services when Furnished at Excepted Off- Campus Providers. For CY 2026, the estimated savings are $290 million, with $220 million of the savings accruing to Medicare, and $70 million saved by Medicare beneficiaries in the form of reduced beneficiary coinsurance.\158\ To effectively establish a method for controlling the unnecessary growth in the volume of drug administration services furnished by excepted off-campus PBDs that does not simply reallocate expenditures that are unnecessary within the OPPS, we believed that this method must be adopted in a nonbudget neutral manner. The impact associated with this proposal is further described in section XXV. of this final rule with comment period.

\158\ In comparison--in CY 2020 when the clinic visit volume control method was fully phased-in the estimated savings was approximately $800 million, with approximately $640 million of the savings accruing to Medicare, and approximately $160 million saved by Medicare beneficiaries in the form of reduced copayments.

While we were refining our method to control for unnecessary increases in the volume of hospital outpatient department services, we continued to recognize the importance of not impeding development or beneficiary access to new innovations. We solicited public comments on other ways to exercise the Secretary's statutory authority under section 1833(t)(2)(F) of the Act:

Are there other services for which CMS should develop a method to control unnecessary increases in the volume of covered OPD services by paying a PFS-equivalent rate for services provided at excepted off-campus PBDs?

Of particular concern for us are the services within the imaging without contrast APCs (APCs 5521-5524). Imaging without contrast services are some the most costly and frequently provided services at excepted PBDs. We believe that there is a high likelihood that there has been unnecessary growth in this space and that a volume control method would be appropriate to apply here in the future. Would it be appropriate to apply this method to the Imaging Without Contrast APCs?

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

Comment: We received a number of comments in response to our comment solicitation on other services for which the Secretary's should exercise his statutory authority under section 1833(t)(2)(F) of the Act. Commenters shared their views on whether there have been unnecessary increases in volume for certain other services and whether it would be appropriate to apply our volume control method to those services.

Response: We thank commenters for their interest and engagement on this important issue. Given the wide array of information presented through this public comment process, we may take the technical recommendations and other detailed feedback provided regarding other services that could potentially have unnecessary increases in volume under consideration for future notice and comment rulemaking.

Comment: Numerous commenters, including organizations representing private health insurance plans, physician associations, specialty medical associations, and individual Medicare beneficiaries, supported the proposal to apply a volume control method for drug administration APCs. Some commenters commended CMS for its proposal, which they believed will help to control costs for both beneficiaries and the Medicare program, as well as foster greater competition in the physician services market. Commenters agreed that this method will help to control the unnecessary increases in volume of services in excepted off-campus PBDs when beneficiaries can generally safely receive these same services in a lower

cost setting but instead receive care in a higher cost setting due to payment incentives. Commenters stated that higher payments to OPDs for lower-complexity services directly has translated into higher costs for Medicare beneficiaries and taxpayers, as hospitals shift care towards higher-paid OPDs. Commenters cited studies showing that this has indirectly driven up Medicare spending and out-of-pocket costs for beneficiaries by incentivizing consolidation of independent physician practices into hospitals, which is associated with higher prices.159 160 161 Commenters noted that consolidation has the downstream effect of shifting more billing from the lower physician office rates to higher OPD rates, further increasing total Medicare spending and beneficiary cost-sharing. Several commenters flagged that consolidation is further driven by incentives in the 340B program, where participating hospitals profit by acquiring physician offices, converting them into outpatient clinics, purchasing discount drugs and funneling drug administration services to this site of care.

\159\ Dranove D, Ody C. Employed for Higher Pay? how Medicare Payment Rules Affect Hospital Employment of Physicians. American economic journal. Economic policy. 2019;11(4):249-271. https://www.aeaweb.org/articles?id=10.1257/pol.

\160\ Neprash HT, Chernew ME, Hicks AL, Gibson T, McWilliams JM. Association of Financial Integration between Physicians and Hospitals with Commercial Health Care Prices. JAMA internal medicine. 2015;175(12):1932-1939. https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2463591.

\161\ Post B, Norton EC, Hollenbeck B, Buchmueller T, Ryan AM. Hospital-physician Integration and Medicare's Site-based Outpatient Payments. Health services research. 2021;56(1):7-15. https://pmc.ncbi.nlm.nih.gov/articles/PMC7839648/.

Commenters wrote that our proposed policy would help to address long-standing payment disparities between OPDs and office-based infusion centers, where commenters believe the same services are delivered at lower cost to Medicare and beneficiaries without compromising quality. Others believed that addressing the unnecessary increases in the volume of these services would help address the ramifications of market distortions that restrict the availability of lower-cost care and increase costs for patients and taxpayers without adding quality improvements. Commenters advocated that non-hospital settings of care often deliver the same or better quality of care at lower cost and rebalancing the effects of unnecessary utilization would enhance the overall value of Medicare spending and direct resources toward lower-cost and effective care models. Commenters asserted that off-campus PBDs are often indistinguishable from physician offices aside from the hospital signage; commenters stated that nothing about the site of care justifies the higher payment rates. Commenters stated that off-campus PBDs are often indistinguishable from physician offices aside from the hospital signage and nothing about the site of care has meaningfully changed to justify their higher payment rates. Because of this, commenters stated that off-campus PBDs are not providing true hospital-based care and do not require additional payment for 24/7 capacity or emergency standby services. Other commenters claimed that the office setting is the most cost-effective and patient-centered site of service for drug administration services. They wrote that delivering drug therapies in the office setting not only saves the health care system money, but also avoids unnecessary risks such as hospital- acquired infections--risks that are particularly concerning for immune- compromised patients receiving drug administration services.

Several commenters also supported implementing this policy in a non-budget neutral manner, as this would allow CMS to protect and preserve the Part B trust fund rather than simply redistributing funds. Commenters state that by aligning payment for routine services with the PFS rate CMS could help discourage site-of-service shifts driven by financial incentives rather than clinical need, promote competition, and create a more level playing field for providers across care settings. Many commenters encouraged CMS to consider expansions of this policy for additional services in excepted off-campus PBDs and to on- campus OPDs in the future.

Response: We appreciate the commenters' support. As mentioned in the CY 2026 OPPS/ASC proposed rule, we share the commenters' concern that payment incentives, rather than patient acuity or medical necessity, are affecting site-of-service decision-making and the downstream effect these payment disparities create. As we noted in the CY 2019 OPPS/ASC proposed rule (83 FR 37138 through 37143), “[a] large source of growth in spending on services furnished in hospital outpatient departments (OPDs) appears to be the result of the shift of services from (lower cost) physician offices to (higher cost) OPDs”. We continue to believe that these shifts in site of service are unnecessary if the beneficiary can safely receive the same services in a lower cost setting but instead receives care in a higher cost setting due to payment incentives. In addition to the concern that the difference in payment is leading to unnecessary increases in the volume of covered outpatient department services, we remain concerned that this shift in care setting increases beneficiary cost-sharing liability because Medicare payment rates for the same or similar services are generally higher in hospital outpatient departments than in physician offices.

We appreciate the comments supporting the implementation of this policy in a nonbudget neutral manner. As we stated in the CY 2026 OPPS/ ASC proposed rule (83 FR 37138 through 37143), we believe implementing a volume control method in a budget neutral manner would not appropriately reduce the overall unnecessary volume of covered OPD services, and instead would simply shift the volume of services within the OPPS system in the aggregate. As detailed later in this section, we are finalizing our proposal, without modification, in response to public comments. We will continue to take information submitted by the commenters into consideration for future study.

Comment: In their comment letter the Medicare Payment Advisory Commission (MedPAC) noted their support for expanding the PFS equivalent payment rate for drug administration services that are provided in excepted off-campus PBDs. They highlighted their June 2023 Report to Congress in which they included a framework they suggested could be helpful in identifying services for which it might be safe and appropriate to align payment rates. They noted that CMS should consult with clinicians, industry, and other interested parties when determining which services to choose.

MedPAC stated that payment parity between the OPPS and PFS should not adversely affect hospitals' ability to be available 24/7 for emergency care, with particular attention paid to safety-net and rural providers. Additionally, they recommended maintaining the packaging of ancillary items in the OPPS. MedPAC reiterated a point from their June 2023 report to the Congress, in which they noted some benefits they see in making budget-neutral adjustments for some OPPS services in conjunction with site-neutral payments. For example, applying a budget- neutral payment adjustment with a site-neutral policy would increase OPPS payment rates for other services including emergency department visits, which would support hospitals' emergency care and standby capacity.

Response: We thank MedPAC for its comment and support of this policy. We have continued to find their work

valuable as we further identify services that may have experienced unnecessary increases in volume in the OPPS. In the CY 2026 OPPS/ASC proposed rule, we requested information from interested parties on other services for which CMS should develop a method to control unnecessary increases in the volume of covered OPD services by paying a PFS-equivalent rate for services provided at excepted off-campus PBDs. We will continue to work with clinicians and industry interested parties when making choices about which services to examine in the future.

We believe that our volume control method will not adversely impact hospitals' ability to provide 24/7 emergency care and, as discussed later in this section, we are finalizing our proposal to exempt rural Sole Community Hospitals from this expanded policy, which we believe addresses MedPAC's concern that a non-budget neutral volume control method will adversely affect rural providers. We are applying our volume control method to a limited set of services provided in a limited set of OPD departments and do not believe that the financial impact of this provision will significantly impact hospitals' ability to provide 24/7 emergency care. Our final policy will only impact drug administration services billed with the “PO” modifier.

We understand that MedPAC's June 2023 recommendation proposed to make some site-neutral adjustments in a budget neutral manner. However, we are using our authority under section 1833(t)(2)(F) of the Act to implement a volume control method to control unnecessary utilization in drug administration. Under sections 1833(t)(2)(F) and (9)(C) of the Act, we are not required to budget neutralize the volume-control method here, and as we stated in the CY 2019 OPPS ASC final rule with comment period (83 FR 59013), we believe implementing a volume control method in a budget neutral manner would not reduce the overall unnecessary volume of covered OPD services, and instead would simply shift services within the OPPS system because of payment rather than medical necessity.

We received several comments which provided detailed legal rationales as to why CMS lacks the statutory authority to reduce payments to excepted off-campus PBDs, particularly in a non-budget neutral manner. We discuss these comments below.

Comment: Commenters suggested that legal developments since the U.S. Court of Appeals for the District of Columbia decision in American Hospital Association v. Azar, 964 F. 3d 1230 (D.C. Cir. 2020), which had supported the agency's interpretation of section 1833(t)(2)(F) of the Act, now may not be viable and undermine the agency's reliance on section 1833(t)(2)(F) of the Act for the proposed volume-control methodology.

Commenters argued that the D.C. Circuit in American Hospital Association v. Azar reviewed HHS' interpretation “under Chevron's two- step framework.” Id. at 1241. But Chevron has since been overruled. See Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 412 (2024). Consequently, “courts need not and under the [Administrative Procedures Act (APA)] may not defer to an agency interpretation of the law simply because a statute is ambiguous”. Id. at 413. Commenters assert that is what the D.C. Circuit impermissibly did in American Hospital Association v. Azar. See 964 F.3d at 1244.

Commenters contend that the agency's reading of section 1833(t)(2)(F) of the Act is not the best interpretation of the law. For reasons previously offered through public comment and litigation, commenters described that the best interpretation of the law is that section 1833(t)(2)(F) of Act does not authorize HHS to lower payments only for certain services performed by certain providers, including and especially those grandfathered under the law.

Commenters go on to argue that other precedential developments cast doubt on the D.C. Circuit's decision in American Hospital Association v. Azar. Commenters explained that the D.C. Circuit did not adequately address what they believed was the district court's correct conclusion that CMS' interpretation of section 1833(t)(2)(F) of the Act assumes the authority to “supersede Congress' carefully crafted relative payment system” based on a single sentence in the U.S. Code. Id. at 158.

Commenters posit that, under HHS' view, a provision that gives the agency authority to adopt a “method[s] for controlling unnecessary increases in the volume” of covered outpatient services permits it to ignore the entire OPPS system and make non-budget-neutral reductions to particular services. Echoing the district court, commenters stated this would massively “upend” the OPPS system (rejecting HHS' attempt to “acquire unilateral authority to pick and choose what to pay for OPD services, which clearly was not Congress' intention”).

Commenters argue that the Supreme Court rulings in West Virginia v. EPA and Biden v. Nebraska “double-down” on the legal principles described above. Commenters describe HHS as claiming unfettered power to depart from the OPPS based on a vague provision buried elsewhere in the statute. They contend that HHS will not be able to do so because the Congress does not “use oblique or elliptical language to empower an agency to make a `radical or fundamental change' to a statutory scheme”. West Virginia, 597 U.S. at 723 (quoting MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218, 229 (1994)).

Response: We continue to believe that section 1833(t)(2)(F) of the Act gives the Secretary authority to develop a method for controlling unnecessary increases in the volume of covered OPD services, including a method that controls unnecessary volume increases by removing a payment differential that is driving a site-of-service decision and, as a result, is unnecessarily increasing service volume.

As we noted in the CY 2019 OPPS/ASC final rule with comment period (83 FR 58818) and in our decision to complete the two-year phase of this policy in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61142), “[a] large source of growth in spending on services furnished in hospital outpatient departments (OPDs) appears to be the result of the shift of services from (lower cost) physician offices to (higher cost) OPDs”. We continue to believe that these shifts in the sites of service are unnecessary if the beneficiary can safely receive the same services in a lower cost setting but instead receives care in a higher cost setting due to payment incentives. In most cases, the difference in payment is leading to unnecessary increases in the volume of covered outpatient department services, and we remain concerned that this shift in care setting increases beneficiary cost-sharing liability because Medicare payment rates for the same or similar services are generally higher in hospital outpatient departments than in physician offices. We continue to believe that our method addresses the concerns described in the CY 2019 OPPS/ASC final rule with comment period (83 FR 59005).

As we stated in the CY 2019 OPPS ASC final rule with comment period (83 FR 59013), we believe implementing a volume control method in a budget neutral manner would not appropriately reduce the overall unnecessary volume of covered OPD services, and instead would simply shift services within the OPPS system because of payment rather than medical necessity. We also outlined in the CY 2019 OPPS/ASC

final rule with comment period (83 FR 59013) that while section 1833(t)(9)(B) of the Act requires that certain changes made under the OPPS be made in a budget neutral manner, this section does not apply to the volume control method under section 1833(t)(2)(F) of the Act.

As noted, the D.C. Circuit previously held that our regulation was a reasonable interpretation of section 1833(t)(2)(F)'s of the Act authority to adopt a method to control for unnecessary increases in the volume of the relevant service. See AHA v. Azar, 964 F.3d at 1241-45. Loper Bright does not change the result. As an initial matter, while Loper Bright changed certain aspects of the interpretative framework the D.C. Circuit used, the Supreme Court cautioned that the “holdings of those cases that specific agency actions are lawful . . . are still subject to statutory stare decisis despite our change in interpretive methodology”. 144 S. Ct. at 2273. AHA's holding that our volume- control methodology complies with section 1833(t)(2)(F) of the Act is therefore still good law.

Even interpreting section 1833(t)(2)(F) of the Act anew under the new Loper Bright framework, the Supreme Court clarified that the Congress “often” enacts statutes that “delegate[ ] discretionary authority to an agency.” Id. at 2263. Section 1833(t)(2)(F) of the Act is just such a statute. By instructing the Secretary to “develop a method for controlling unnecessary increases in the volume of covered OPD services” without specifying the method, the statute delegates discretionary authority to the Secretary. Because, as the D.C. Circuit explained, our policy “falls comfortably within the plain text of subparagraph (2)(F)” and is further supported by its structure, 964 F.3d at 1241, it does not fall outside the “outer statutory bounds” of the delegation, as discussed in Loper Bright. We thus read AHA to apply the Chevron framework because that was the law at the time and to suggest that if the court had analyzed this matter under the new Loper Bright framework, the result would have been the same. That aspect of the D.C. Circuit's holding, particularly when coupled with the stare decisis principles discussed previously in the final rule with comment period, indicate that there is no reason to doubt the continued validity of our policy. 144 S. Ct. at 2268.

Nor do we agree that the major question doctrine or related interpretation principles undermine our interpretation of section 1833(t)(2)(F) of the Act. As the Supreme Court recently reiterated, those principles do not apply in the “ordinary” case; only in “extraordinary cases” will courts apply a “different approach” from usual to arrive at the best meaning of a statute. W. Virginia, 597 U.S. at 721. Here, neither the “`history and the breadth of the authority that [the agency] has asserted,” nor the “economic and political significance” of that authority militate against our reading of section 1833(t)(2)(F) of the Act. Unlike the novel debt-relief authority the court rejected in Biden v. Nebraska, 600 U.S. at 500-01, we have not offered in this final rule with comment period a novel interpretation of section 1833(t)(2)(F) of the Act, or even a novel methodology to control volume increases. Instead, we extend a judicially-endorsed methodology to another context. We are not “restructur[ing] the American energy market,” like the agency in West Virginia, 597 U.S. at 724, but preventing a particular payment system manipulation--unnecessary volume increases--that the Congress expressly required us to address. And section 1833(t)(2)(F) of the Act lacks any term carrying “a connotation of increment or limitation” like the statute in Biden v. Nebraska, 600 U.S. at 494 (internal quotation marks omitted). Here, the Congress authorized the agency to put in place a “methodology” that accomplishes the goal of controlling unnecessary volume-increases. Following the Congress' instruction to accomplish its stated goal does not “upend” the payment system the Congress crafted or make radical changes to it; it helps to vindicate it. By focusing on the length of section 1833(t)(2)(F) of the Act, commenters confuse the number of words the Congress used with the substantive authority those words communicate. “Brevity,” whether in regulatory documents or legislation, “should not be mistaken for lack of detail.” Seven Cnty. Infrastructure Coal. v. Eagle Cnty., Colorado, 145 S. Ct. 1497, 1512 (2025).

Here, the agency has identified an unnecessary increase in volume in a set of OPPS payment codes based on payment differentials between the OPPS and the PFS. It has tailored a methodology to eliminate that unnecessary volume increase by eliminating its cause. As the D.C. Circuit already found, that falls comfortably within the agency's delegated authority under the best reading of section 1833(t)(2)(F) of the Act.

Comment: Commenters outlined that the D.C. Circuit failed to account for section 603 of the BBA. Commenters explained that the BBA of 2015 created two categories of provider-based departments (PBDs): (1) those established before November 2015 and (2) those established after November 2015. For those PBDs in existence prior to November 2015, commenters stated that the Congress required CMS to continue paying off-campus PBDs (referred to in the statute as “excepted” off- campus PBDs) at the same rate as hospitals; for post-November 2015 PBDs, the Congress required CMS to pay PBDs at the same rate as independent physicians' offices. Commenters believed that the Congress reinforced this policy choice by providing that “mid-build” PBDs should be paid at the same rates as existing, pre-November 2015 off- campus PBDs, that is, the same rate as hospitals. Some commenters asserted that section 603 of the BBA, represents the Congress' thoughtful consideration of MedPAC's recommendation to eliminate the difference in payment between hospital outpatient departments and physician's offices in certain circumstances, and CMS' proposal undermines the balance struck by the Congress. Again, commenters state the D.C. Circuit ruled incorrectly and that the agency should not be able to use the decision in American Hospital Association v. Azar to deflect from addressing this issue. They take issue with the fact the D.C. Circuit treated section 603 of the BBA as an “alternative” argument and relegated its analysis of that provision to a separate section of its opinion from its analysis of section 1833(t)(2)(F) of the Act. Commenters opined that the court of appeals answered the section 1833(t)(2)(F) of the Act question both as if it were wholly distinct from the section 603 of the BBA question and with a heavy thumb on the scale due to Chevron deference.

Going forward, they proclaim that the agency cannot rely solely on American Hospital Association v. Azar and must instead provide a more fulsome legal explanation than the D.C. Circuit for why the text and history of section 603 of the BBA do not foreclose its authority here.

Response: As we stated in the CY 2019 OPPS/ASC final rule with comment period (83 FR 59005) we continue to believe the changes required by section 603 of the BBA made in section 1833(t) of the Act had the effect of addressing some of the concerns related to shifts in settings of care and overutilization of services in the hospital outpatient setting for new off-campus PBDs that began billing Medicare for OPPS services after November 1, 2015. In passing section 603 of the BBA, Congress addressed the specific circumstances that lead to the proliferation of new off-campus

provider-based departments. As we stated in the CY 2017 OPPS/ASC final rule with comment period (81 FR 79562), we believe Congress may have been trying to address the incentive for hospitals to purchase physician's offices and convert them to OPDs without changing their location or patient population with section 603 of the BBA. In 2019 and now in 2025, we are addressing new and separate circumstances, the over utilization of certain services in the OPPS.

We disagree with commenters that by passing legislation a decade ago that does not reference section 1833(t)(2)(F) of the Act, Congress impliedly meant to circumscribe our authority under that provision. As the D.C. Circuit explained when rejecting a similar argument, “[n]othing in the text of section 603 of the BBA indicates that preexisting off-campus PBDs are forever exempt from adjustments to their reimbursement” and instead “leav[es] the exempted providers subject to all the provisions of the OPPS statute, including subparagraph (2)(F).” AHA, 946 F.3d at 1246.

Additionally, as the D.C. Circuit explained, even assuming that section 603 of the BBA could be read to judge increases in volume at preexisting off-campus PBDs are not “unnecessary” under section 1833(t)(2)(F) of the Act, that judgment would extend only to 2015 and “would not mean that Congress considered acceptable the continued volume increases later taking place” in other years. Id. When the Congress passed the BBA of 2015, Medicare OPPS expenditures were $56 billion and growing at an annual rate of about 7.3 percent. In addition, the percentage increase in volume and intensity of outpatient services was increasing at 3.4 percent. In 2019 without the volume control method, OPPS expenditures would have been approximately $74.5 billion, growing at a rate of 9.1 percent, with the volume and intensity of outpatient services increasing at 5.4 percent. For 2026, we estimate that, without an expansion of this policy to drug administration services, OPPS expenditures would be $101.0 billion, growing at a rate of 8.6 percent, with the volume and intensity of outpatient services increasing at 6.8 percent. A review of claims processed in CY 2022 showed that only 2.3 percent of payments for outpatient services are made at the PFS equivalent rate for off-campus PBDs.\162\ We would not be able to adequately address the unnecessary increases in the volume of clinic visits in OPDs after 2015 if we did not apply this policy to all off-campus OPDs.

\162\ https://advisory.avalerehealth.com/insights/cms-site-neutral-payments-affect-small-share-of-spending.

Finally, the hospitals are also wrong that Loper Bright undermines the D.C. Circuit's analysis of section 603 of the BBA. Nothing in the court's analysis of section 603 of the BBA suggests that it found the provision ambiguous or incorrectly deferred to the agency's interpretation of it. See id. And contrary to the commenters' suggestion, the court fully considered any impact of section 603 of the BBA on the agency's authority under the OPPS statute, even if it characterized the section 603 argument as “alternative”.

Comment: Commenters reiterated their objections from the CY 2019 OPPS/ASC proposed and final rules with comment period that these existing and proposed 60 percent payment cuts constitute “adjustments” that are subject to the budget neutrality requirements set forth in section 1833(t)(9)(B) of the Act, and urged CMS to return the OPPS to the budget neutral payment system required by the Congress.

Response: As we stated in the CY 2019 OPPS/ASC final rule with comment period (83 FR 59005), we maintain that while section 1833(t)(9)(B) of the Act does require that many changes made under the OPPS be made in a budget neutral manner, this provision does not apply to the volume control method under section 1833(t)(2)(F) of the Act as outlined through our proposals in CY 2019 and CY 2026 rulemakings. As we noted in the CY 2019 OPPS/ASC proposed rule (83 FR 37138 through 37143), unlike the wage adjustment under section 1833(t)(2)(D) of the Act and the outlier, transitional pass-through, and equitable adjustments under section 1833(t)(2)(E) of the Act, section 1833(t)(2)(F) of the Act refers to a “method” for controlling unnecessary increases in the volume of covered OPD services, not an adjustment. Likewise, sections 1833(t)(2)(D) and (E) of the Act also explicitly require the adjustments authorized by those paragraphs to be budget neutral, while the volume control method authority at section 1833(t)(2)(F) of the Act does not include such a requirement. Therefore, we maintain that the volume control method proposed under section 1833(t)(2)(F) of the Act is not one of the adjustments under section 1833(t)(2) of the Act that is referenced under section 1833(t)(9)(A) of the Act that must be included in the budget neutrality adjustment under section 1833(t)(9)(B) of the Act. Moreover, section 1833(t)(9)(C) of the Act specifies that if the Secretary determines under methodologies described in paragraph (2)(F) of section 1833(t) of the Act that the volume of services paid for under this subsection increased beyond amounts established through those methodologies, the Secretary may appropriately adjust the update to the conversion factor otherwise applicable in a subsequent year. We continue to interpret this provision to mean that the Secretary will have implemented a volume control method under section 1833(t)(2)(F) of the Act in a nonbudget neutral manner in the year in which the method is implemented. Further, as we stated in the CY 2019 OPPS/ASC proposed rule (83 FR 37138 through 37143), we believe that implementing a volume control method in a budget neutral manner would not appropriately reduce the overall unnecessary volume of covered OPD services, and instead would simply shift the volume within the OPPS system in the aggregate.

In addition, the D.C. Circuit has held not only that budget neutrality is not required under a volume control method, making that method budget neutral would be contrary to the purpose and intent of the Medicare statute. For example, the court emphasized that subparagraph (2)(F) of the Act “says nothing about budget- neutrality,” and specifically rejected the hospitals' argument that volume-control methods must be budget neutral. AHA, 964 F.3d at 1241. After all, it would be “anomalous” for the statute to require a rate cut made for purposes of volume control to be “implemented budget- neutrally” because, if we were required “to redistribute the costs traceable to the provisions of unnecessary services throughout the OPPS,” the result would be “no net savings to Medicare,” “largely negating the point of reducing reimbursement in the first place”. Id. at 1241 through 1242. (See 83 FR 37142 through 37143). This common- sense interpretation is thus supported by the text and structure of the OPPS statute, as both we and the D.C. Circuit have explained.

Comment: Some commenters were particularly concerned with using only the most recent claims data as this does not address the vertical consolidation trend whereby hospitals acquired many physician offices that were later reclassified as hospital outpatient departments (OPDs). Commenters stated that only using more recent data “bakes in” the higher number of services provided by OPDs as a result of this consolidation resulting in more claims paid at the higher OPPS rate. Commenters suggest using a time period or a range of years prior to the

consolidation trend (for example, 2010 through 2014), as this captures the volume of service before the vertical consolidation trend. Commenters stated this timeframe provides a more appropriate baseline for analyzing the site of care and corresponding fee schedule since it better illustrates the landscape before consolidation trends resulted in shifts to care settings for the financial benefit of the hospitals. Other commenters suggested that in order for CMS to understand which services can be appropriately provided in freestanding office settings a reasonable place to begin is with understanding where procedures have been historically performed. But in doing so, commenters stated, CMS must not permit the provider consolidation dynamic that has driven the need for site neutrality to hobble CMS' efforts to address the consequences of that dynamic.

Conversely some commenters raised concerns related to the data we presented in the CY 2026 OPPS/ASC proposed rule. Specifically, commenters stated a belief that the timeframe we used to analyze the volume of drug administration services, which largely was periods of time between 2012-2024, was not appropriate because that timeframe encompasses growth trends that are not relevant to current utilization. Commenters contend that utilization prior to the implementation of section 603 of the BBA should not be evaluated because the BBA fully addressed any overutilization that may have been occurring.

Some commenters stated that their analysis contradicted our findings of volume increases for drug administration services. Commenters cited the CMS finding that there has been a 70 percent increase in the volume of chemotherapy claims billed with HCPCS code 96413 (chemotherapy administration, intravenous infusion technique; up to 1 hour, single or initial substance/drug) for services furnished in excepted PBDs between 2011 and 2023. Commenters review of claims data indicated that claims for this service in excepted, off-campus PBDs are declining. In 2020 they believe that approximately 550,000 units of this code were reported for chemotherapy administrations in excepted PBDs, and this number fell to 546,000 units in 2024. Their data analysis shows that there was not a single year in this 5-year period where excepted PBD claims for this HCPCS code have exceeded 2020 utilization.

Response: We thank the commenters for their input. Based on these comments, we have looked at a wider timeframe to determine whether it changes our conclusion that the unnecessary volume of a service has increased. OPPS spending by traditional Medicare and its beneficiaries increased 71 percent from 2012 to 2022, and spending per Medicare Part B beneficiary under the OPPS grew rapidly, at an annual rate of 6.9 percent, during this period.\163\ Disregarding the growth from this time period and how it has impacted the baseline of OPPS spending would be unwise and would not account for the factors that led to this extreme and often unnecessary growth. We do not believe that it would be appropriate to only examine data from 2020 and later years as some commenters did. In our CY 2026 OPPS?ASC proposed rule analysis, we started our claims review in CY 2011 in order to examine what volume looked like prior and during the intense period of consolidation prior to the passage of the BBA of 2015 and in the subsequent years. Commenters indicated that data spanning the roll-out of section 603 of the BBA and the mid-build exception in 2017 through at least 2019 would naturally report growth arising from providers' acquisition or construction of off-campus PBDs. Rather than a reason to exclude this data, we believe fully understanding how the growth of excepted off- campus PBDs impacted the volume of drug administration services is crucial in examining unnecessary increases in the volume of outpatient services. We note that MedPAC has also used 2012 as a baseline year for their analyses.

\163\ https://www.healthaffairs.org/doi/10.1377/hlthaff.2024.01501.

Looking only at data from CYs 2020-2024 removes the context for the changes that were occurring in the OPPS over the prior decade. Even if volume leveled off for a particular service in recent years, we would assert that if utilization grew unnecessarily from 2011-2019 and that overutilization is built into the baseline of the OPPS services being provided in recent years, then recent year utilization still reflects unnecessary increases in volume. Stated differently, we do not believe it would matter for purposes of this provision if an increase in volume over ten years happened steadily at the same rate each year, or if the volume fluctuated over those ten years, but ended up at the same increased amount in the final year.

Looking at a wider timeframe only further supports our analysis as presented in the CY 2026 OPPS/ASC proposed rule. As we discussed earlier, we found that there has been an increase in volume of services paid through the drug administration APCs (5691-5694) over time, which would indicate that there has been migration of these services to the OPD setting. From 2011 to 2019 the volume of drug administration services paid under these APCs grew by almost 35 percent. This growth persisted even with the introduction of the PFS-equivalent rate for PBDs subject to section 603 of the BBA starting in 2017. The COVID-19 PHE did impact utilization across the OPPS, but we have seen the volume of drug administration services rebound and return to this pattern of growth and also believe that overutilization has become entrenched in the baseline of the OPPS for some services and APCs. Between 2018 and 2024 the number of beneficiaries enrolled in fee-for-service Medicare decreased by over 14 percent.\164\ Since 2022, we have simultaneously seen increases in the volume of drug administration services provided in OPDs utilized per beneficiary.\165\ Between 2020 and 2023 the utilization of drug administration services per beneficiary grew by over 30 percent. Meaning that while there are now fewer Medicare fee- for-service beneficiaries than there were prior to the COVID-19 PHE, each beneficiary on average is receiving more drug administration services in the OPD setting than they were prior to the COVID-19 PHE. 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.

\164\ https://data.cms.gov/summary-statistics-on-beneficiary-enrollment/medicare-and-medicaid-reports/medicare-monthly-enrollment.

\165\ Based on our analysis of claims data and Medicare FFS enrollment.

Again, as stated earlier, some HCPCS codes within the drug administration APCs have experienced significant growth. HCPCS code 96413--which describes chemotherapy administration, intravenous infusion technique; up to 1 hour, single or initial substance/drug--is the most frequently billed HCPCS code within any of the drug administration APCs at excepted PBDs. This code has seen an almost 70 percent increase in volume from 2011 to 2023.\166\ 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 conclude that this 70 percent increase in excepted hospital outpatient department volume over a 10-year period was at least partially driven by the payment

differential between the physician office and OPD setting. The HCPCS codes representing chemotherapy administration grew in volume by 64 percent in the OPPS between 2011 and 2023.\167\ These changes and the context in which they occurred, illustrate our continued belief that shifts in the sites of service are inherently unnecessary if the beneficiary can safely receive the same services in a lower cost setting but instead receives care in a higher cost setting due to the payment incentives created by the difference in payment amounts.

\166\ Based on our analysis of claims data.

\167\ 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.

Comment: Commenters also examined physician billing across from CYs 2020 to 2024 for HCPCS code 96413 and their findings indicate that approximately 1.85 million units of this service were furnished in the physician office setting in 2020, and that physician office utilization grew to 1.87 million units in 2024. Thus they conclude, over the same 5-year period, there is stable growth in physician office utilization (+0.6 percent) and stable to declining utilization of the same service in excepted PBDs (-0.6 percent). They ultimately conclude that the distribution of this service among ambulatory settings has remained stable over the past 5 years. They state that despite our emphasis on HCPCS code 96413 in the CY 2026 OPPS/ASC proposed rule, they believe that recent utilization data on HCPCS code 96413 directly undercuts CMS' assertion that there is “unnecessary growth” in utilization justifying the proposed payment cut.

In other cases, commenters cited data that shows growth in utilization in the physician office setting alongside more modest growth in excepted PBDs. Commenters gave the example of CPT code 96405 (chemotherapy administration; intralesional, up to and including 7 lesions) where utilization increased by approximately 156 percent in the physician office setting, but only increased by approximately 34 percent in excepted PBDs.

In their data analysis, commenters found contractions and growth in drug administration services furnished in excepted PBDs and physician offices. Commenters thus conclude that you could not support a finding of unnecessary growth in drug administration services furnished in excepted PBDs. Commenters also contend that the drug claims billed along with these drug administration codes reflect significant medical advancements and changes in treatment protocols, with new drugs being approved by the FDA and used in hospitals and physician offices for the first time during this five-year period. Where CMS states that “increases in the volume of drug administration services provided in OPDs utilized per beneficiary” since 2022 are an example of unnecessary utilization, commenters contend that there may be medical reasons for these changes (including new drugs and new drug regimens).

Commenters also note that the proposed payment reduction would apply to some services that are not currently furnished in excepted off-campus PBDs. Between 2020 and 2023, there were no Medicare claims for excepted PBDs for the following HCPCS codes: 37195, 90473, 95144, 95170, 96371, 96422, 96423, 96440, and G0012. Commenters state that even if a payment reduction can constitute a “method for controlling unnecessary increases in the volume of covered OPD services”, the payment reductions cannot be applied to services with negligible utilization. Furthermore, commenters cited that some of the HCPCS codes had negligible to no utilization in the physician office setting, including HCPCS codes 96446, 96542, and C8957, which might indicate that it is not reasonable to expect that these services would be provided more often in the physician office setting but for the higher payment rate for these services in the OPPS.

Response: We thank the commenters for their input. We draw a different conclusion from the cases made above. As stated earlier, using 2020-2024 as a time frame for utilization review, even if just for comparison, would not allow us to adequately evaluate whether there has been unnecessary utilization in the OPPS. It would be difficult to fully appreciate the trends in the physician office without acknowledging the baseline for what the volume of services would have been absent the impact of consolidation. We would reason that stability in the physician market shows that the mechanisms in force are persistent and not driving care into the lower cost setting. As commenters note, the provision of these services in the physician office is stable, safe, and being done at a substantial volume. This furthers our belief that some services in the OPD are inherently unnecessary if the beneficiary can safely receive the same services in a lower cost setting but instead receives care in a higher cost setting due to the payment incentives created by the difference in payment amounts.

We do not believe that the inference that growth in utilization in the physician office setting in comparison to more modest growth in excepted PBDs indicates that there is no unnecessary utilization in the excepted PBD. Again, taking the data out of its full historical context does not give you an accurate gauge of the actual growth of that service in excepted PBDs.

As we stated in the CY 2026 OPPS/ASC proposed rule, our review of the utilization of drug administration services in excepted PBDs found increases in the volume of services over time, increases in the volume of services provided per beneficiary, and cases of significant volume growth for some individual HCPCS codes within the drug administration APC family. We believe that these changes represent unnecessary increases in the volume of covered outpatient department drug administration services and that it would be appropriate to apply our volume control method to these services.

In the CY 2026 OPPS/ASC proposed rule we discussed how we examined the twenty most frequently billed HCPCS codes in the drug administration APC family at both excepted and non-excepted off-campus PBDs. We found that twenty HCPCS codes account for over 98 percent of the volume of drug administration services in off-campus PBDs. We found that the 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 know that there is claims volume for the overwhelming majority of HCPCS codes in the drug administration APCs with both the “PO” and “PN” modifiers. There are approximately 61 HCPCS codes within the four levels of the drug administration APCs. Meaning that the remaining 41 codes account for only 2 percent of the volume of drug administration services for PBDs. We have evaluated unnecessary utilization at the APC level and found unnecessary increases in utilization. In the CY 2026 OPPS/ASC proposed rule, we noted specific HCPCS codes that experienced significant increases in volume. We believe this data supports the proposed method to control unnecessary increases in volume for all codes in the drug administration APCs.

We intentionally chose to apply the volume control method for drug administration services at the APC level, rather than at the service level. While we exercised our volume control authority for the first time by applying it to a single code, G0463 (clinic visit), we believe that the most practical and efficient way to apply this method for drug administration services is to apply it to all drug administration services at the APC level. As such, even if a few less frequently used codes in those APCs are rarely utilized in either the outpatient setting or the physician office setting, that does not detract from the larger point that the drug administration services in these APCs have seen unnecessary growth in the volume of outpatient services and that it would be appropriate to apply our volume control method to the services in these APCs.

Comment: A few commenters suggested that, to control unnecessary volume increases, CMS would need to identify a necessary rate of increase for the volume of drug administration services. Absent that benchmark, commenters stated that this is payment reduction rather than a method to control volume under section 1833 (t)(2)(F) of the Act. Commenters were further concerned that CMS has excluded year-to-year monitoring of volume from the proposed policy.

Response: We disagree that we need to determine a specific increase in volume that is necessary before determining that there has been unnecessary increases in volume under section 1833(t)(2)(F) of the Act. Because the effects of site-of-service payment differentials are pervasive throughout the OPPS it would be extremely difficult, on a HCPCs or APC level, to measure what volume should have been absent that influence. Retroactively creating a benchmark would not substantively improve our efforts to measure unnecessary increases in volume. Using a benchmark could lead to similar issues as seen with the Medicare sustainable growth rate (SGR) formula that was used under the Medicare Physician Fee Schedule (MPFS). This formula set annual benchmarks for Medicare physician spending based on growth in the gross domestic product (GDP). The Congress chose to eliminate in the SGR in 2015 after multiple years where they intervened to delay cuts and provide increases to physician payments. Setting a benchmark and then retroactively holding providers to it may actually be harder on providers than simply using a volume control method to prospectively set OPPS rates for these services at a PFS equivalent rate.

We continue to believe shifts of services to the off-campus OPD setting are unnecessary if the beneficiary can safely receive the same services in a lower cost setting but instead receives care in a higher cost setting due to the payment incentives created by the difference in payment amounts. As we noted in the CY 2019 OPPS/ASC final rule with comment period (83 FR 37138 through 37143), we have developed many payment policies, such as packaging policies and comprehensive APCs, to address the rapid growth of services in the OPPS. However, these policies have not been able to control for unnecessary increases in volume that are due to site-of-service payment differentials, which create an incentive to furnish a service in the OPD that could be furnished in a lower cost setting based solely on the higher payment amount available under the OPPS. We previously made the case that the clinic visit service had experienced this shift in site-of-service. We likewise believe that drug administration services furnished in excepted off-campus PBDs are the same as drug administration services furnished in nonexcepted off-campus PBDs. We believe that applying an amount equal to the site-specific PFS payment rate for nonexcepted items and services furnished by a nonexcepted off-campus PBD (the PFS payment rate) for drug administration services, as described by APCs 5691-5694, when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act, is an appropriate method to control the unnecessary increase in the volume of outpatient services. Just as we have monitored the impacts on volume for the clinic visit volume control policy, we will monitor the impacts of this policy on drug administration services.

Comment: A few commenters noted that CMS has previously acknowledged the risk that payment cuts could unintentionally increase volume. Comments cited the CY 2008 OPPS/ASC final rule (72 FR 66580), where CMS declined to adopt a sustainable growth rate (SGR) like methodology. They quoted that final rule:

“implementing such a system could have the potentially undesirable effect of escalating service volume as payment rates stagnate and hospital costs rise, thus actually resulting in a growth in volume rather than providing an incentive to control volume. Therefore, this approach to addressing the volume growth under the OPPS could inadvertently result in the exact opposite of our desired outcome”.

Commenters concluded that subsection 1833 (t)(2)(F) of the Act only authorizes a method for controlling unnecessary increases in volume, following CMS' logic, they stated a policy that increases volume through price reductions would not be a permissible volume-control method.

Response: As discussed above, the Medicare SGR formula was used under the Medicare (MPFS and set annual targets for Medicare physician spending based on growth in the GDP. Under the SGR, if physician spending exceeded its target in a given year, payment rates would be cut the following year, while spending that was below the target led to increased rates. The Medicare Access and CHIP Reauthorization Act of 2015 permanently eliminated the SGR formula for the PFS. In the CY 2008 OPPS/ASC rulemaking we did not propose to adopt a sustainable growth rate (SGR) like methodology for the OPPS. We were referring to the September 8, 1998 proposed rule, proposing the establishment of the OPPS (63 FR 47585), where we did consider creating a system that mirrors the SGR methodology applied to the MPFS update to control unnecessary growth in service volume. While in 1998 we may have contemplated the effects that implementing an SGR methodology might have had on the OPPS, that does not mean that we viewed that any future payment reductions would necessarily result in increases in the volume of services.

In 2008 we were concerned about the continued double digit increases in the growth in expenditures in the OPPS from CY 2001-2008. This was coupled with increases in the volume and intensity of services in that same timeframe that ranged from 3.5 percent to 10.1 percent. In 2008, we stated we were hopeful that expanded packaging and, ultimately, greater bundling under the OPPS may result in sufficient moderation of growth in volume and spending that further volume controls would not be needed. However, we noted that if spending were to continue to escalate at the current rates, even after we have exhausted our options for increased packaging and bundling, we are considering multiple options under our authority to address these issues, including the possibility of imposing external controls that could link growth in volume to reduced payments under the OPPS in the future.

As we noted in the CY 2026 OPPS/ASC proposed rule, from 2011-2019, the time of the greatest provider consolidation and growth of excepted PBDs, the mean and median annual increase in the volume and intensity of hospital outpatient services was about 5.5 percent and 5.4 percent,

respectively, from 2011 to 2019. During this time period, the estimated increase in aggregate annual hospital reimbursements incurred through Medicare Fee for Service (FFS) Part B was $28.2 billion.\168\ We would contend that spending has continued to increase, especially from 2011 through 2019, and we have done exactly as we stated we would. We have considered and implemented other options under 1833(t)(2)(F) of the Act authority to address unnecessary growth.

\168\ Available in Table IV.B6 at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2019.pdf.

Comment: Some commenters stated that the volume control method for clinic visits was not an effective method to control volume as their data analysis indicated that volume did not decrease. One commenter cited a study which found that only 1.5 percent of OPPS payments from 2017 through 2020 were to non-excepted PBDs as evidence that policies that align payment across sites of care do not reduce volume. Commenters opined that since the clinic visit policy did not effectively control volume increases, the drug administration policy should be abandoned. Other commenters asserted that it is not a “method” at all and that it addresses a purported volume increase that the Congress had already addressed under section 603 of the BBA.

Response: Our data indicates that clinic visit volume in excepted off-campus PBDs has decreased since 2021 both in absolute volume and in relative volume compared to the total of OPPS and PFS volume. Additionally, we note that it is difficult to ascertain the impact of a policy such as this without a clear counterfactual. That is to say, we cannot state what the trend of clinic visits at excepted off-campus PBDs would be outside of the existence of this policy. However, given both on-campus and non-excepted PBDs have experienced increases in volume for the clinic visit, while excepted off-campus has experienced a decrease, we believe that our clinic visit volume control method has reduced the unnecessary increases in off-campus PBDs and, likely, overall volume. As we discussed in the CY 2019 OPPS/ASC final rule with comment period, we continue to believe that section 1833(t)(2)(F) of the Act gives the Secretary broad authority to develop a method for controlling unnecessary increases in the volume of covered OPD services, including a method that controls unnecessary volume increases by removing a payment differential that is driving a site-of-service decision, and as a result, is unnecessarily increasing service volume. We believe that applying an amount equal to the site-specific 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 is an appropriate method to control the unnecessary increase in the volume of outpatient services. Further, we believe this method can be applied to control the unnecessary increases in the volume of drug administration services.

Comment: Some commenters raised concerns related to the use of the PFS relativity adjuster for this volume control method. Commenters indicated that it was not an appropriate unit of payment for services furnished at OPDs as the OPPS payments include far more packaged costs than similar services paid under the PFS. Specifically, commenters indicated that, because the OPPS packages costs, OPPS payment includes things other than the strict payment for the CPT/HCPCS code available under the PFS, and indicated a belief that a relativity adjuster based on a direct comparison would not be appropriate. One commenter stated that over 98.7 percent of the OPPS payment rate is for packaged services and that it would be more accurate to consider the OPPS payment for the chemotherapy administration alone as approximately $5 compared to the $119 paid to physicians' offices. One commenter noted that the estimates presented in the CY 2026 OPPS/ASC proposed rule for the relative difference between the OPPS and PFS payment rate for drug administration codes were generally lower than the 40 percent PFS equivalent payment rate and instead suggested we directly use the technical component of the PFS payment, with some exceptions for packaging.

Other commenters took issue with the overall comparison between OPPS and PFS payment rates as commenters believe they reflect fundamentally different approaches to valuing services. Commenters believe that there is no basis for substituting payment rates from one system to the other. Some commenters were concerned that the Medicare PFS payment rates are not sustainable for physicians. One commenter, a large medical association, stated that while it generally supported site neutral payments, it did not “believe that it is possible to sustain a high-quality health care system if site neutrality is defined as shrinking all payments to the lowest amount paid in any setting”. The commenter went on to state that “CMS should not implement site neutrality in a way that reduces payment to the lowest common denominator and should reinvest savings from lowering facility payments to other Part B services, including payments under the physician fee schedule”.

Response: We appreciate the commenters' concerns about the PFS relativity adjuster. We conducted an analysis for the CY 2026 OPPS/ASC proposed rule which indicated that the 40 percent PFS relativity adjuster was a reasonable equation of OPPS to PFS payments for the same services. This analysis included accounting for packaged services which are separately payable under the PFS. Specifically, when comparing the OPPS and PFS relative payment rates, we reduced the OPPS payment rate used for the analysis by the percentage of that payment rate which we identified as attributable to other HCPCS frequently billed on the same day which would be packaged in the APC. We are uncertain where the one commenter's assertion that 98.7 percent of the OPPS payment rate is packaged costs, our analysis indicated that the amount is generally between 0 and 50 percent based on the specific HCPCS code. Accordingly, we reduced the OPPS payment rate by the percentage attributable to packaged codes which are separately payable under the PFS for our analysis.

While there was some variation in PFS payments for different HCPCS codes (as there is variation in geometric mean costs for HCPCS codes within a single APC under the OPPS) the range of relative costs between the OPPS and the PFS overall for each of the four drug administration APCs was between 24 and 33 percent. This would indicate to us that 40 percent is a reasonable PFS equivalence factor for the purposes of our volume control method. We do not believe it would be appropriate to use the technical component of the PFS payment rate directly as we believe that accounting for frequently packaged services for each APC would be unnecessarily complex. We believe that aligning the payment rate under our volume control method with the payment rate for nonexcepted off- campus PBDs is appropriate as our data indicates that the payment rate is sufficient for off-campus PBDs to continue to provide drug administration services while removing the payment incentives that drive the unnecessary volume this policy is intended to control.

As we stated in the CY 2019 OPPS/ASC final rule with comment period (83

FR 59005), to the extent that similar services can be safely provided in more than one setting, we do not believe it is prudent for the Medicare program to pay more for these services in one setting than another. We believe the increase in the volume of clinic visits, in particular, was due to the payment incentive that exists to provide this service in the higher cost setting. Because these services could likely be safely provided in a lower cost setting, we believed that the growth in clinic visits paid under the OPPS was unnecessary. Further, we believed that setting the OPPS payment at the PFS-equivalent rate would be an effective method to control the volume of these unnecessary services because the payment differential that is driving the site-of- service decision would be removed.

We note that the overall amount of Medicare payments to physicians and other entities made under the PFS is determined by the PFS statute, and the rates for individual services are determined based on the resources involved in furnishing these services relative to other services paid under the PFS. To the extent the commenter believes that the PFS rate for a particular service is misvalued relative to other PFS services, we encourage the commenter to nominate the service for review as a potentially misvalued service under the PFS.

Comment: One commenter discussed the Oncology Care Model and stated a belief that the model's results indicated that payment incentives would not change the volume of drug administration services.

Response: The Center for Medicare & Medicaid Innovation (CMS Innovation Center) develops payment and delivery models designed to improve the effectiveness and efficiency of specialty care. Among those specialty models was the Oncology Care Model, which aimed to provide higher quality, more highly coordinated oncology care at the same or lower cost to Medicare. Under the Oncology Care Model (OCM), physician practices entered into payment arrangements that included financial and performance accountability for episodes of care surrounding chemotherapy administration to cancer patients. CMS also partnered with commercial payers in the model. We do not believe that the structured payment incentives of the OCM serve as a reasonable comparison for the drug administration volume control policy. We believe the clinic visit volume control policy is a more reasonable direct comparison and, as discussed previously, we have strong evidence to suggest that policy did have a material impact on clinic visit volume at excepted off- campus PBDs.

Comment: We received several comments attesting to the continuing negative effects of vertical consolidation, which is the practice of hospitals acquiring physician practices. Commenters stated that the current payment differentials have fueled consolidation by hospitals and health systems, which frequently acquire independent practices to shift infusion services into higher-paying outpatient departments. Commenters believe that this consolidation is further driven by incentives in the 340B program. Between 2012 and 2024, commenters noted, the share of physicians working in a physician-owned practice declined from over 60 percent to 42 percent.\169\ Commenters were concerned with the direct impact this shift has continued to have on patients and beneficiaries. Commenters believe that consolidation has led to markets across the country becoming increasingly concentrated, or dominated by a limited number of enterprises. This, they contend, has reduced competition for healthcare services and greater market share by large hospitals and health systems is associated with greater out-of-pocket costs for patients and greater costs to Federal programs, without any improvements in quality.\170\ Consolidation, they stated, has been associated with a 4.9 percent increase in Medicare enrollee spending, and a 14.1 percent increase in the price of services in the commercial market. One insurer was particularly concerned about the impact of consolidation on their State's market. They noted that in their State there is a 47 percent higher use of hospital outpatient visits, on a per capita basis, compared to the U.S. average.

\169\ https://www.ama-assn.org/system/files/2024-prp-pp-characteristics.pdf.

\170\ https://www.rand.org/pubs/research_reports/RRA1820-1.html.

Response: We thank the commenters for their thoughts and share their concerns about the ongoing negative effects of vertical integration on the OPPS. Similar to clinic visits, we believe there is a correlation among the increasing volume of OPD drug administration services, vertical integration, and the higher OPPS payment rates for drug administration services.

A 2021 report by the American Medical Association found that more than 50 percent of U.S. physicians are employed by a hospital or health system, a roughly 20 percent increase from 2012.\171\ The percentage of physicians in practices owned by hospitals or health systems increased from 23 to 29 percent in 2010 to 44 to 48 percent in 2018, depending on physicians' specialties.\172\

\171\ Kane, Carol K., Recent Changes in Physician Practice Arrangements: Private Practice Dropped to Less Than 50 Percent of Physicians in 2020, Chicago, Ill.: American Medical Association, 2021.

\172\ https://www.rand.org/pubs/research_reports/RRA1820-1.html.

Multiple studies have found increases in prices after vertical consolidation by hospitals acquiring or sharing ownership with physician practice groups.173 174 175 176 177 178 A key driver of higher prices among vertically consolidated entities is a shift in the site-of-service to higher-cost settings, specifically the on-campus hospital setting or OPD where the hospital can bill for both professional and facility fees. Results from multiple studies suggest that physicians working in hospital-owned practices are more likely to refer patients to hospitals than freestanding facilities.179 180 Furthermore, studies have found that physicians integrated with hospitals changed their referral patterns, steering more patients to the owning hospitals.181 182 Results from one study also suggest that those owning hospitals are more likely to be higher-cost, less convenient, and lower-quality options.\183\

\173\ https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2018.0472.

\174\ https://doi.org/10.1016/j.jhealeco.2005.04.009.

\175\ https://www.healthaffairs.org/doi/10.1377/hlthaff.2013.1279.

\176\ https://doi.org/10.1016/j.jhealeco.2018.04.001.

\177\ https://onlinelibrary.wiley.com/doi/full/10.1002/hec.3502.

\178\ https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2021.01007.

\179\ https://doi.org/10.1016/j.jhealeco.2018.04.001.

\180\ https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.01006.

\181\ https://doi.org/10.1016/j.jhealeco.2016.08.006.

\182\ https://doi.org/10.1002/hec.3502.

\183\ https://doi.org/10.1016/j.jhealeco.2016.08.006.

Similar to the studies of the effect of vertical consolidation on price, multiple studies have found increases in spending associated with vertical consolidation.184 185 186 187 188 189 190 191 192 One study found higher Medicare expenditures for physicians working at acquired practices and for acquiring hospitals following consolidation.\193\ Another study found that physicians who primarily practice at hospitals had higher Medicare reimbursement amounts.\194\ There continues to be a link between integration and increased costs. Coupling the increases in integration with the migration and growth of drug administration services leads us to believe that the growth of drug administration services in the OPPS represents unnecessary utilization. As we discuss below, we believe that the 340B program has added an additional incentive, outside of OPPS payment rates, for hospitals to acquire physician office practices and shift drug administration services from the lower cost physician office setting to the higher cost OPD.

\184\ https://pmc.ncbi.nlm.nih.gov/articles/PMC1361007/.

\185\ https://jamanetwork.com/journals/jama/fullarticle/1917439.

\186\ https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2463591.

\187\ https://pmc.ncbi.nlm.nih.gov/articles/PMC7080686/.

\188\ https://onlinelibrary.wiley.com/doi/10.1111/1475-6773.13613.

\189\ https://doi.org/10.1016/j.jhealeco.2016.12.007.

\190\ https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.01006.

\191\ https://doi.org/10.1016/j.jhealeco.2016.08.006.

\192\ https://pmc.ncbi.nlm.nih.gov/articles/PMC8810743/.

\193\ https://doi.org/10.1016/j.jhealeco.2016.12.007.

\194\ https://onlinelibrary.wiley.com/doi/10.1111/1475-6773.13613.

Comment: Several commenters suggested that drug administration services in particular have experienced shifts in the site-of-service and unnecessary increases in volume due in part to the combination of vertical integration and the 340B program. Commenters asserted that hospital-physician vertical integration is not just fueled by the payment incentives that exist between the two settings. Consolidation, commenters stated, is further driven by incentives in the 340B program, where hospitals profit by acquiring physician offices and converting them into PBDs. Commenters cited studies that found that hospitals newly participating in the 340B program shifted the site of cancer drug administration to OPDs and increased spending on other cancer care.\195\ Commenters stated that the shift in the delivery of chemotherapy drugs to outpatient settings also implicates the 340B Drug Pricing program and potential interactions it may have with this proposed policy. This commenter noted a study, which currently is under peer review, that found hospitals newly participating in 340B, compared to non-participating hospitals, led to a higher volume of drug administration services in off-campus OPDs, even though they were subject to site-neutral payments. This could indicate that 340B participation offers hospitals an additional incentive to increase drug administration services at off-campus OPDs even when site-neutral payment is in place.

\195\ https://pmc.ncbi.nlm.nih.gov/articles/PMC6153182/.

One commenter stated that 340B eligibility should be prohibited for future off-campus PBDs. This commenter explained that many 340B hospitals have purchased physician practices, retained their pre- existing off-site locations (often even the name of the practice), and commenced providing drug administration services at these “child sites” or off-campus outpatient facilities, which are then eligible for 340B drug discounts from manufacturers. This, the commenter explains, generates revenue for the hospital but does not necessarily benefit patients. They conclude that just as the Congress has closed the loophole for new off-campus PBDs with respect to Medicare reimbursement, it should also close the loophole that allows these off- campus outpatient facilities to benefit from 340B drug pricing--a major driver of hospital acquisition of physician practices and infusion clinics. Specifically, they recommend that any future acquisitions of physician practices by a 340B eligible hospital be ineligible for the 340B program if they continue to treat patients in an off-campus facility that is the same location where the practice provided care prior to the acquisition.

Response: We thank the commenters for their input. The 340B Drug Pricing Program requires pharmaceutical manufacturers to sell outpatient prescription drugs to participating health care facilities at discounted prices. Facilities that participate in the 340B program are hospitals, clinics, and other providers of health care services as well as other organizations that purchase drugs, such as those affiliated with State and local governments. About 90 percent of health care facilities that participate in the 340B program also participate in the Prime Vendor Program (PVP). Through that program, the Health Resources and Services Administration contracts with an external organization, known as the prime vendor, to support 340B operations. These off-site outpatient clinics are often off-campus provide-based departments.

Commenters mainly suggest statutory changes for Congress. They do, however, raise that policies like the 340B program could be contributing to growth in the volume of drug administration services. Our initial review revealed studies that suggest that the 340B program shifted the site of cancer drug administration to OPDs and increased spending on other cancer care.\196\ But neither that study nor commenters suggest that the 340B program is responsible for the entire shift in volume from physician offices to OPDs. Instead, this information suggests at most that for drug administration services, the payment incentives might be layered. We address in this rule the incentive to shift volume away from physician practices and into hospital OPDs for drug administration services that could be safely provided in either setting based just on the differences between PFS and OPPS payment for drug administration services. Concerns that the 340B program might further incentivize an additional shift in volume away from physicians practices and towards more expensive hospital OPDs are outside the scope of this rulemaking and would need to be considered in future rulemaking.

\196\ https://pmc.ncbi.nlm.nih.gov/articles/PMC6153182/.

Comment: One commenter noted a possible error in CMS' calculation of the estimated effect of the proposed drug administration policy. Commenters stated that they believe there may have been in error in the savings shown in Table 111 of the CY 2026 OPPS/ASC proposed rule. This table shows the estimated annual and 10-year impacts of the proposed drug administration services policy. In particular, commenters were unable to understand the substantial savings that accrue to the Part B Trust Fund for 2027 and future years.

Response: Beginning in 2027, the savings from this policy begin to flow into the baseline for Medicare Advantage rates, thus resulting in a significant increase in savings for 2027 compared to 2026. For 2026, the Medicare Advantage rates had already been calculated at the time of the CY 2026 OPPS/ASC proposed rule and thus the 2026 Medicare Advantage rates are not impacted by this proposed policy.

Comment: Several commenters asserted that CMS fails to consider other explanations for increases in the volume of drug administration services in PBDs.

Commenters disagreed that that higher payments for drug administration services under the OPPS are incentivizing hospital acquisition of independent physician offices and, therefore, leading to an “unnecessary increase in the volume of services”. Commenters offered that when hospitals acquire independent physician offices, it is not because there is a financial incentive to do so, but is instead because physician practices are failing. Commenters placed the blame on poor payer mix, increasing regulatory and administrative burden, and declines in payment. Commenters also believe disproportionate attention has been placed on hospitals' acquisition of physician practices. They note that other entities, such as commercial insurers and private equity have invested heavily in physician practice acquisitions. Commenters cite one study that contends that private equity, physician groups, and health insurers, acquired the vast majority of physician practices from 2019 to 2023, while hospitals and health systems accounted for only 6 percent of acquisitions during this period.

Response: As discussed earlier in this section and in the CY 2019 OPPS/ASC final rule with comment period, we continue to believe there is sufficient evidence that consolidation and the payment disparity between the OPPS and PFS rates has driven unnecessary utilization in the OPPS. Hospitals did, in large quantities, acquire physician practices and convert them into PBDs. A financial incentive to make these conversions did exist. While physician practices may be acquired by private equity or commercial insurers, only hospitals are able to move payments to the practice from the PFS to the OPPS as a result of the acquisition. The OPPS was intended to pay for services provided in the hospital outpatient setting, it has no mandate to subsidize care or the cost of providing that care as a result of broader economic forces or the perceived inadequacy of other forms of payment.

We have seen providers react to the financial incentives created by these payment differentials. In January 2019, we began the phase-in of our volume control method for the clinic visit (G0463) and began paying the PFS equivalent rate to excepted PBDs for this service. Non-excepted PBDs were already being paid at the PFS equivalent rate for this service. We found that between 2018-2024 the volume of clinic visit services provided in excepted PBDs billing with modifier “PO” (excluding rural SCHs) decreased by almost 27 percent. This indicates to us that our volume control method was successful and can address unnecessary increases in the volume of outpatient services.

Comment: Commenters stated that CMS inappropriately equates drug administration services provided in OPDs with what they described as less comprehensive and complex care provided in freestanding physician offices. Commenters explained that hospital and health system costs are higher than physician office costs because hospitals invest significant resources to meet the stricter regulatory requirements and safety standards to which they are subject. Commenters contend that the factors below contribute to the increased operating costs for off- campus PBDs compared to physician offices:

Standby services and emergency care.

Comprehensive staff and equipment.

Licensing, accreditation regulatory requirements.

Drug acquisition and storage.

Complex patient care.

Therefore, they contend that such care is not equivalent, and current OPPS payment rates appropriately account for these significant differences.

Commenters cited specific measures that hospitals must take to ensure that medications are prepared and administered safely while also providing important care coordination services for their patients. Commenters noted that hospitals must take steps to ensure that a licensed pharmacist supervises drug preparation, rooms are cleaned with positive air pressure to prevent microbial contamination, and employees are protected from exposure to hazardous drugs. In addition they note that hospitals must remain in compliance with important safety standards. Commenters also highlighted the different requirements for safe preparation, administration, care coordination, and oversight that applies to hospitals and physician offices who administer drugs.

Commenters stressed that hospitals and health systems invest significant resources to provide essential benefits and advanced levels of healthcare to their communities. They note hospitals must cover their costs through direct patient care revenue and that OPPS payment rates must be sufficient to support the higher standards of care that CMS and other regulators require to be met in hospital-based settings. Commenters state that these obligations incur additional costs that are not reflected in the MPFS rate, making site-neutral payments inequitable and unsustainable.

Response: We appreciate that some off-campus hospitals outpatient departments sometimes incur costs that physician offices do not. But the issue we are addressing here is whether the difference between OPPS payment rates and PFS payment rates for drug administration services distorts the market and incentivizes providers to shift volume to the higher-paying setting unnecessarily. We note again that we found that drug administration services were not just paid more in the OPD setting, but that the same services were paid 200-300 percent higher under the OPPS than under the PFS. We would note that aspects of the OPD setting that the commenters identify--standby and emergency services; comprehensive staff and equipment; licensing, accreditation regulatory requirements; drug acquisition and storage; and complex patient care--do not change the fact that a specific drug administration service provided in an off-campus provider-based department of a hospital is clinically similar to the provision of that same drug administration service when provided in a physician office. We believe that these drug administration services are safe to perform in the physician office setting and that physician offices also incur costs to adhere to regulatory and safety standards and ensure that they are fully equipped to provide drug administration services. While some hospital off-campus hospital outpatient departments may have additional costs that physician offices do not, we believe that hospitals also have some efficiencies physician offices do not, such as greater purchasing power than physician offices, and likely are able to achieve cost savings through those efficiencies that may offset some of the additional costs identified by commenters. And we do not agree that because hospitals might use profits stemming from increases in the volume of drug administration services to indirectly subsidize other activities that this renders the increase in volume in drug administration services necessary.

Comment: Commenters stated that CMS failed to consider that OPDs are more likely to serve Medicare patients who are sicker, more clinically complex, and more likely to be disabled or living in poorer, rural communities than patients treated in independent physician offices.

Commenters cited two studies which were prepared for the American Hospital Association. The first study commenters cited stated that when comparing beneficiaries treated in OPDs

to beneficiaries treated in independent physician offices, beneficiaries receiving care in OPDs are:

54 percent more likely to be under 65 and disabled.

60 percent more likely to reside in a rural county.

61 percent more likely to be dually eligible for Medicare and Medicaid.

67 percent more likely to have multiple serious chronic conditions, including heart disease, diabetes, and cancer.

More likely to have recently used hospital care, including:

++ 73 percent more likely to have prior emergency department visits.

++ 114 percent more likely to have prior inpatient hospitalizations.

The second study cited by commenters compared beneficiaries with cancer treated in OPDs to beneficiaries with cancer treated in physician offices. This study concluded that beneficiaries with cancer receiving care in OPDs are:

131 percent more likely to be under 65 and disabled,

75 percent more likely to reside in a rural county,

125 percent more likely to be dually eligible for Medicare and Medicaid,

63 percent more likely to have multiple serious chronic conditions, and

More likely to have recently used hospital care, including:

++ 63 percent more likely to have prior emergency department visit.

++ 113 percent more likely to have prior inpatient hospitalizations.

Commenters assert that these sicker beneficiaries, who they note are more commonly treated in OPDs, require a greater level of care. Therefore, commenters stated, that to the extent that these differences result in variations in the cost of care, site-neutral payments would have adverse effects on patient access to care.

Response: We appreciate that OPDs serve unique patient populations and provide services to medically complex beneficiaries, however the data provided by the commenter does not demonstrate how these factors necessitate a higher payment for all drug administration services provided in OPDs. While commenters indicate that these patients are more frequently treated in OPDs, they do not show how OPDs alone are clinically capable of treating complex patients or how physician offices would be unequipped to safely treat these same beneficiaries. As we stated in the CY 2019 OPPS/ASC final rule with comment period, we continue to believe shifts in the sites of service described in the preceding paragraphs are inherently unnecessary if the beneficiary can safely receive the same services in a lower cost setting but instead receives care in a higher cost setting due to the payment incentives created by the difference in payment amounts. Further, the OPPS contains mechanisms to pay providers for complex care. Hospitals can receive outlier payments to help hospitals mitigate financial risks associated with complex and costly procedures that exceed the normal payment amount. We also use complexity adjustments to provide increased payment for certain comprehensive services.

Comment: Commenters state that CMS fails to provide any deference to physician's judgment as to the clinical necessity of the OPD setting. Commenters explained that our discussion of the proposed payment reduction for chemotherapy and other drug administration services furnished in excepted, off-campus PBDs too heavily equates outpatient services furnished in physicians' offices and those furnished in hospital outpatient departments.

Commenters stated that aligning payment would treat an OPD and a physician's office as virtually interchangeable. This approach, commenters stated, fails to acknowledge the difference in the resources and level of care offered by hospital outpatient departments and the variability in the acuity and needs of patients undergoing chemotherapy or other drug administrations represented by these codes.

Commenters contend that there are certain services that cannot be furnished in a physician's office, as demonstrated by the fact that there is no non-facility payment rate under the PFS for those services, and there are instances where a physician, in his or her judgment, would determine that a hospital outpatient department, not a physician's office, is the appropriate setting for a particular patient. This decision may be based on the patient's needs, the presence of comorbidities, or a desire for the resources available in an outpatient department. Commenters stated that with respect to drug administration services more specifically, a physician may refer a patient to the hospital for a particular infusion or other drug administration because of the acquisition cost of the drugs, the equipment needed to safely store and mix the drugs, and the inherent danger and complexity that the handling and mixing of chemotherapy drugs poses to the patient and staff.

Response: We thank the commenters for their input; however we believe that payment should have no influence on what setting of care a physician decides is most appropriate for their patient. That decision should be based on the medical needs of the patient. Our proposed policy does not prevent beneficiaries from receiving these services in an OPD if it is medically necessary. Studies examining the role of vertical integration on physicians' choice of care setting show that physicians are much more likely to admit a given patient to their acquiring hospital and that these same hospitals tend to be higher cost, less convenient, and lower quality than nearby options-- suggesting negative patient welfare effects.\197\ We are simply removing an incentive that unnecessarily increases outpatient volume for drug administration services. Across the OPPS we are finalizing policies, like the elimination of the Inpatient Only List and changes to the Ambulatory Surgical Center Covered Procedures List, to empower physicians to have the ultimate say in what site of service is best for their patients.

\197\ https://doi.org/10.1016/j.jhealeco.2016.08.006.

Comment: Some commenters were concerned about the financial impact this proposal would have on providers. This reduction, commenters stated, threatens the financial viability of hospitals, particularly those serving underserved communities. Commenters stated that CMS should monitor the impact of this policy on hospitals and the availability of impacted services and develop additional exemption processes if needed.

Response: We appreciate commenters concerns about the financial viability of hospitals and their ability to serve vulnerable populations. As discussed below, we are finalizing our proposal to exempt rural Sole Community Hospitals from this policy as we have previously determined that rural Sole Community Hospitals have higher costs than other outpatient hospitals. We will continue to monitor the effect of this change in Medicare payment policy, including the volume of these types of OPD services, in the future and may revisit this policy in future rulemaking.

Comment: We received several comments suggesting that CMS should phase-in this policy over multiple years and not implement the full payment reduction in CY 2026. Commenters suggested that this would be consistent with the precedent for clinic visit.

Response: While we did phase in the clinic visit payment reduction over 2 years, we do not believe that is necessary for drug administration services. At the time we stated we

would use a phase-in to balance the immediate need to address the unnecessary increases in the volume of clinic visits with providers' need for time to adjust to these payment changes. The clinic visit is the most frequently billed service in the OPPS and that weighed heavily in our decision to phase in the implementation of this policy. We believe that the provider community is capable of adapting to the change in payment for drug administration services, which is smaller in magnitude than the clinic visit payment reduction and, as a result, we do not believe that a phase-in is necessary.

After consideration of the public comments we received, we are finalizing our proposal to use our authority under section 1833(t)(2)(F) of the Act to apply an amount equal to the site-specific PFS payment rate for nonexcepted items and services furnished by a nonexcepted off-campus PBD (the PFS payment rate) for HCPCs codes assigned to the drug administration services APCs, when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act (departments that bill the modifier “PO” on claim lines) without modification. In addition, we are finalizing our proposal to implement this policy in a nonbudget neutral manner without modification. We will monitor the impacts of this policy to ensure that beneficiaries continue to have access to quality care. 7. Request for Information: Expanding the Method To Control for Unnecessary Increases in the Volume of Covered OPD Services to On- Campus Clinic Visits

As discussed above, we finalized a method to control unnecessary increases in the volume of covered OPD services under section 1833(t)(2)(F) of the Act in the CY 2019 OPPS/ASC final rule with comment period. This method was to pay the PFS-equivalent payment rate for clinic visit services furnished by excepted off-campus PBDs, removing the payment incentive to furnish clinic visit services in these PBDs. In the above discussion, we note that the volume of covered OPD services is still unnecessarily high for other services, and we proposed a similar policy for drug administration services furnished by excepted off-campus PBDs. For the reasons explained above, we believe that drug administration is the next most appropriate service to include in our method for volume at excepted off-campus PBDs. However, we recognized that the clinic visit is still the most utilized service across the OPPS and over 60 percent of clinic visits furnished under the OPPS are furnished on-campus. These on-campus clinic visits are not impacted by the existing volume control policy. Given the volume for clinic visits is so significant, we requested information on whether it would be appropriate to address unnecessary increases in the volume of covered OPD services by expanding the method to control unnecessary increases in volume to on-campus clinic visits. We requested information on the potential impact of a policy to pay the PFS- equivalent rate of 40 percent of the OPPS rate for clinic visit services furnished in on-campus OPDs. We noted that we intended to use the responses to this request to inform future rulemaking. Specifically, we requested feedback on the following topics:

Given clinic visits can safely be performed in other, lower cost settings, to what extend are clinic visits performed at OPDs “necessary” or “unnecessary”? Is it appropriate to include on- campus clinic visits when considering how to address unnecessary volume increases at OPDs? How would commenters suggest that CMS could identify which clinic visits may be necessary to be provided on-campus at an OPD? Are there such clinic visits?

What would be the impact on providers of such a policy? Would any category of hospital be impacted more than others, for example, those in rural areas? Would such a policy result in lower on- campus OPD volume for clinic visits?

What would be the impact on beneficiaries of such a policy? To what extent would removing any payment incentive from site- of-service determination provide beneficiaries with greater access at sites other than on-campus? To what extent would lower payments for on- campus clinic visits reduce beneficiary access at on-campus OPDs? To what extent would lower co-payments for on-campus clinic visits improve beneficiary access by reducing cost as a potential barrier to care?

Are there additional costs associated with on-campus clinic visits? If there are additional costs associated with on-campus clinic visits, to what extent could these clinic visits be furnished in a lower-cost setting, for example an off-campus PBD or a physician's office?

Rural SCHs are excluded from the off-campus clinic visit policy. Should rural SCHs be excluded from any similar on-campus policy? Should any other type of hospital be excluded? Are there any types of hospitals where clinic visits would be more likely to represent “necessary” volume despite being able to be furnished in a lower-cost setting?

We thank commenters for their detailed comments regarding expanding the method to control for unnecessary increases in the volume of covered OPD services. We received a range of comments on expanding the method to the on-campus setting for clinic visits, imagining without contrast in off-campus PBDs, and other services that may have experienced unnecessary growth. We intend to take these comments into consideration as we develop our proposals for future rulemaking. 8. Exemption for Rural Sole Community Hospitals

We proposed to expand our method to control unnecessary increases in the volume of covered OPD services by paying a PFS-equivalent payment rate for drug administration services furnished in excepted off-campus PBDs. As discussed earlier in this section, we believe that this policy is an appropriate method for controlling unnecessary volume of these drug administration services in excepted off-campus PBDs because beneficiaries can generally safely receive these same services in a lower cost setting but instead receive care in a higher cost setting due to payment incentives. In these cases, we explained that, similar to the clinic visit policy established in the CY 2019 OPPS/ASC final rule with comment period (83 FR 37142), to the extent similar services can be safely provided in more than one setting, we do not believe it is prudent for the Medicare program to pay more for these services in one setting than another. We continue to believe the difference in payment for these services is a significant factor in the shift in services from the physician's office setting to the hospital outpatient department.

In the CY 2023 OPPS/ASC final rule with comment period (87 FR 72047 through 72051), we stated that we believe that the volume of the clinic visit service in PBDs of rural Sole Community Hospitals (SCHs) has been driven by factors other than the payment differential for that service. In that rule, we finalized an exemption to our clinic visit volume control method and to instead pay the full OPPS payment rate, rather than the PFS-equivalent rate, when the clinic visit is furnished in excepted PBDs. In that rule, we explained that rural SCHs have historically received special payment treatment to account for their higher costs and the disproportionately harmful impact that payment reductions could have on them. Because we

proposed a volume control payment policy for drug administration services, we have additionally considered whether a similar policy for rural SCHs or other provider types would be appropriate. a. Special Payment Treatment for Rural SCHs

Across the various Medicare payment systems, CMS has established a number of special payment provisions for rural providers to ensure access to high quality care for beneficiaries in rural areas. CMS administers five statutory hospital payment designations in which rural or isolated hospitals that meet specified eligibility criteria receive higher reimbursement for hospital services than they otherwise would receive under Medicare's standard payment methodologies. A rural hospital may qualify as a Critical Access Hospital (CAHs),\198\ Sole Community Hospital (SCH),\199\ Rural Emergency Hospital (REH),\200\ or Medicare Dependent Hospital \201\--each of which has different eligibility criteria and payment methodologies. With the exception of CAHs, rural hospitals may also qualify as Low Volume Hospitals \202\ and Rural Referral Centers (RRCs),\203\ which qualify these hospitals for additional payments or exemptions. Not all rural or isolated hospitals receive special payment treatment under the OPPS. For instance, CAHs are not paid under the OPPS and are reimbursed at 101 percent of reasonable costs for outpatient services. PBDs of CAHs are not subject to section 603 of the BBA.

\198\ 42 CFR 485.601 through 485.647.

\199\ 42 CFR 412.92.

\200\ 42 CFR 419.91.

\201\ 42 CFR 412.108.

\202\ 42 CFR 412.101.

\203\ 42 CFR 412.96.

Rural SCHs are a hospital type that has received special payment treatment under the OPPS to account for their higher costs and the disproportionately harmful impact that payment reductions could have on them. In the CY 2006 OPPS final rule with comment period (70 FR 68556 through 68561), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, items paid at charges reduced to costs, and devices paid under the pass-through payment policy. This policy was adopted under section 1833(t)(13)(B) of the Act, which required the Secretary, by January 1, 2006, to provide for an appropriate adjustment under paragraph (t)(2)(E) to reflect the higher costs of hospitals in rural areas if the Secretary determined, pursuant to a study required by section 1833(t)(13)(A) of the Act, that the costs to rural hospitals by APC exceeded those costs for hospitals in urban areas. Our analysis revealed that rural SCHs had significantly higher costs per unit than urban hospitals. We have continued to adjust payments for rural SCHs by 7.1 percent each year since 2006. As discussed in section II.E. of this final rule with comment period, for CY 2026 we proposed to continue the current policy of utilizing a 7.1 percent payment adjustment for rural SCHs.

As noted above, in the CY 2023 OPPS/ASC final rule with comment period we finalized an exemption to our policy to pay the PFS- equivalent rate for the clinic visit service at excepted off-campus PBDs to control unnecessary increases in the volume of covered OPD services. Commenters were generally supportive of this proposal and noted that rural SCHs are typically the chief, if not sole, source of community outpatient care for rural residents and opined that this exemption would be vital to ensuring continued access to the care they need. Some commenters stated that the exemption should be extended to other types of hospitals, including urban SCHs. In that rule, we explained that our analysis did not find that urban SCHs had the additional resource costs for covered outpatient department services that rural SCHs have, and only finalized applying the clinic visit policy exemption to rural SCHs. b. Utilization of Drug Administration Services in Off-Campus Provider- Based Departments of Rurals SCHs

Earlier in this section, where we proposed the volume control method policy for drug administration services, we stated that to the extent there are lower-cost sites of service available, beneficiaries and the physicians treating them should be able to choose the appropriate care setting and not be encouraged to receive or provide care in settings for which payment rates are higher solely for financial reasons. However, many rural providers, and rural SCHs in particular, are often the only source of care in their communities,\204\ which means beneficiaries and providers are not choosing between a higher paying off-campus PBD of a hospital and a lower paying physicians' office setting. The closure of inpatient departments of hospitals and the shortage of primary care providers in rural areas likely further drives utilization to off-campus PBDs in areas where rural SCHs are located.

\204\ https://www.shepscenter.unc.edu/wp-content/uploads/dlm_uploads/2017/11/SCHs_Differences_in_Community_Characteristics.pdf.

We have reviewed utilization data for drug administration services at rural SCHs and have not found strong evidence that drug administration services are being utilized at an unnecessary volume at excepted off-campus PBDs of rural SCHs. As with clinic visits, we do not believe that rural SCH site-of-service decisions for drug administration are being made solely based on payment rates. Rural areas often experience lower availability of health care professionals and hospitals than urban areas.\205\ Hospital closures in rural communities are associated with lower access to health care and worse health outcomes.\206\ Access to outpatient services, particularly in rural areas, is vital to keeping beneficiaries from being admitted as an inpatient because beneficiaries in rural settings face unique challenges that impact their health. In the CY 2023 OPPS/ASC final rule with comment period, we explained that we believe that exempting rural SCHs from the clinic visit policy would help to maintain access to care in rural areas by ensuring rural providers are paid for clinic visit services provided at off-campus PBDs at rates comparable to those paid at on-campus departments (87 FR 72049). We believe that a similar exemption is warranted for the drug administration policy for similar reasons. Specifically, we proposed to exempt rural SCHs from payment of the site-specific PFS-equivalent payment for drug administration services, as described by APC family 569X, when furnished at an off- campus PBD exempted from section 1833(t)(21) of the Act (departments that bill the modifier “PO” on claim lines). Under this proposed policy, a rural SCH would continue to bill services in APC family 569X with the “PO” modifier for CY 2026 and the payment rate for such services would continue be the full OPPS payment without the PFS relativity adjustment.

\205\ https://www.gao.gov/assets/gao-21-93.pdf.

\206\ Mills CA, Yeager VA, Unroe KT, Holmes A, Blackburn J. The impact of rural general hospital closures on communities--A systematic review of the literature. J Rural Health. 2024;40:238- 248. https://doi.org/10.1111/jrh.12810.

This exemption results in higher payments to excepted off-campus PBDs of rural SCHs compared to if it were not finalized and rural SCHs were subject to the proposed volume control method. The proposed CY 2026 OPPS full payment rates for drug administration APCs 5691, 5692, 5693, and 5694 were $47.83, $74.57, $216.49, $341.52,

respectively. The PFS-equivalent rates for these APCs, calculated by applying the 40 percent relativity adjuster to the OPPS payment rates for rural SCHs, would have been $19.13, $29.83, $86.60, $136.61, respectively. By exempting rural SCHs, the Medicare payments for these services would remain at the OPPS level. We estimate that exempting rural SCHs from the method to control unnecessary volume of drug administration services is a difference of approximately $16 million for CY 2026. Per treatment, exempting rural SCHs from this policy results in beneficiary cost sharing remaining between $5.74 and $40.98 higher than it would be should we not finalize this exemption, depending on the service. We note, however, that these figures do not represent increases in costs to Medicare or the beneficiaries above the current policy, as our proposed exemption would maintain current payment rates at excepted off-campus PBDs of rural SCHs of 107.1 percent of the OPPS payment rate for these services. These figures were solely for the purpose of comparing potential savings should we implement a method to control unnecessary volume in drug administration services without such an exemption.

We invited comments on all aspects of the proposed exemption for rural SCHs from the method to control unnecessary volume of drug administration services. Specifically, we requested comments on whether such an exemption is appropriate for rural SCHs, what the impact on SCHs would be should we finalize the method without an exemption for rural SCHs, and whether we should consider any other hospital types for an exemption to either of the policies to control unnecessary volume of outpatient services at off-campus PBDs. Additionally, we requested comments on whether the current exemption for rural SCHs from the method to control unnecessary volume of clinic visit services remains appropriate.

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

Comment: The majority of commenters supported our proposal to exempt rural Sole Community Hospitals (rural SCHs) from payment of the site-specific Medicare PFS-equivalent payment for any HCPCs codes assigned to the drug administration services APCs, when furnished at an off-campus PBD excepted from section 1833(t)(21) of the Act (departments that bill the modifier “PO” on claim lines). Several commenters opposed the policy in general but stated that should CMS finalize the volume control method for drug administration services, we should also finalize the proposed exemption for rural SCHs. Some commenters opined on the appropriateness of this exemption and noted that rural SCHs have higher costs and are important for access in rural areas. One commenter discussed urban-rural reclassifications and supported reclassified-rural hospitals receiving the exemption. Only one commenter expressed explicit opposition to the exemption for rural SCHs; this commenter stated that any exemptions to the volume control methodology should be targeted for specific, independent hospitals.

Response: We thank the commenters for their support of the exemption for rural SCHs. As discussed in the CY 2026 OPPS/ASC proposed rule, our historical analysis indicated that rural SCHs have higher costs and we agree that their financial health is vital to ensure continued access to care in rural areas. We acknowledge the nuanced perspective that many commenters took in supporting the proposed exemption while disagreeing with the volume control methodology overall. We appreciate the discussion of reclassifications in regard to this policy and agree that any exemption for rural SCHs would include those SCHs that have reclassified as rural, consistent with our rural SCH exception for the clinic visit volume control method. While we appreciate the one commenter's opinion that any exemption should be targeted, we believe the rural SCH designation generally indicates a hospital has additional costs and is vital for access in rural areas. We disagree with the commenters that exemptions should only be made for independent hospitals, as we believe that rural SCHs, which can be part of a larger chain, also face similarly heightened costs, according to our analysis. We intend to continue to monitor costs at rural SCHs and to ensure that this exemption continues to be warranted both for the clinic visit and drug administration policies.

Comment: Several commenters suggested additional types of hospitals for which they believed further exemptions would be warranted. Such hospital types included urban SCHs, Medicare Dependent Hospitals (MDHs), urban and rural safety-net hospitals, REHs, FQHCs, and all rural hospitals. One commenter noted that there were very few urban SCHs which were not reclassified as rural. Some commenters discussed how hospitals other than rural SCHs can be important for access, generally in rural areas. A few commenters requested a new CMS designation for essential hospitals and requested we except those from the volume control method.

Response: As we discussed in the CY 2026 OPPS/ASC proposed rule, our historical analysis has found that rural SCHs have higher costs which we believe is appropriate to consider when developing a payment policy such as this. Rural SCHs have historically received special treatment under the OPPS due to these higher costs. As we stated in the CY 2023 OPPS/ASC final rule with comment period (87 FR 72047 through 72051) we believe exempting rural SCHs, which have demonstrated additional resource costs, is appropriate to ensure these hospitals can remain open to serve the beneficiaries who rely on them for their care. We share commenters' concerns about the financial difficulties associated with maintaining access to care in medically vulnerable communities. However, in each of these cases, the Congress has not previously determined that any of these hospital types required additional payments for outpatient services.

We proposed a narrow exception to our clinic visit policy largely based upon the historical treatment and documented additional resource costs of rural SCHs under the OPPS. We are only excepting rural SCHs because we continue to believe in the underlying principles of the clinic visit policy--that same rationale continues to justify application of the volume control method for clinic visits to other services. These same principles apply to the exemption for drug administration services. Where the difference in payment is leading to unnecessary increases in the volume of covered outpatient department services, we remain concerned that this shift in care setting increases beneficiary cost-sharing liability because Medicare payment rates for the same or similar services are generally higher in hospital outpatient departments than in physician offices. Further, we do not believe that commenters provided sufficient reasoning or data to show that the other provider types suggested (Medicare Dependent Hospitals, Urban Sole Community Hospitals, Rural Referral Centers, Medicaid DSH, Medicare DSH, and Low-Volume Adjustment Hospitals) demonstrate the additional resource costs that rural SCHs do and should therefore also be exempted from this OPPS payment policy. We share commenters' concerns about maintaining access to care in urban and rural settings and enhancing access to care in medically vulnerable communities. We will continue to study

access and cost to see if further exemptions to the volume control policy are appropriate in the future.

Comment: Some commenters suggested other criteria for exemptions which would not be based on hospital type. Several commenters discussed certain drug administration services which they believe should qualify for an exemption, such as biologics which were only given to high acuity patients or cell and gene therapy. One commenter suggested that CMS should exempt drug administration services associated with oncology, immunotherapy, and other high-acuity treatments where they contend immediate access to hospital resources is essential. A different commenter requested exemptions for high-risk patients. Another commenter suggested the volume control methodology should be targeted only for hospitals which do not maintain the same comprehensive services as hospital outpatient departments.

Response: We appreciate the thoughtful suggestions and will consider them for potential future rulemaking. We are concerned that exempting a small subset of services from the volume control methodology could inadvertently incentivize an increase in the provision of those services in the higher cost setting of care. Furthermore, there is no clear clinical justification for exempting certain services while leaving others non-exempted, and we believe it would be most transparent to propose any service-specific exceptions through notice and comment rulemaking. As for the other suggestions related to high risk patients and low service hospitals, we are not certain of how we would identify such patients or hospitals; however, we would appreciate further input these suggestions in the future.

Comment: Several commenters discussed the impact of the proposed method to control volume for drug administration on cancer and children's hospitals. Commenters highlighted that payment for cancer hospitals is based on a payment-to-cost ratio and that lowering payment would indirectly impact these cancer hospitals.

Response: We appreciate the discussion of the impact of this policy on cancer and children's hospitals. We note that any reduced initial OPPS payment to PPS-exempt cancer hospitals as a result of this policy would lower a PPS-exempt cancer hospital's payment-to-cost ratio and would result is an offsetting increased adjustment at cost report settlement. We believe that the impact of this policy on the target payment-to-cost ratio, by lowering non-cancer hospital's payment-to- cost ratios, would be relatively small and that, as we believe the reduced payment for non-cancer hospitals for these services is appropriate, likewise the lower target payment-to-cost ratio would be appropriate.

After consideration of public comments we received, we are finalizing our proposal to exempt rural Sole Community Hospitals (rural SCHs) from payment of the site-specific Medicare PFS-equivalent payment for any HCPCs codes assigned to the drug administration services APCs, when furnished at an off-campus PBD excepted from section 1833(t)(21) of the Act (departments that bill the modifier “PO” on claim lines). We believe that exempting rural SCHs from the volume control policy for drug administration services will help to maintain access to care in rural areas by ensuring rural providers are paid for drug administration services provided at off-campus PBDs at same rate paid when the service is furnished in on-campus departments. Finalizing this policy also aligns with the special payment treatment rural SCHs receive under the OPPS. We will continue to monitor the effects of this change in Medicare payment policy.

B. Request for Information: Adjusting Payment Under the OPPS for Services Predominately Performed in the Ambulatory Surgical Center or Physician Office Settings

In general, Medicare payments to hospital outpatient departments under the Outpatient Prospective Payment System (OPPS) are higher than payments made to ASCs under the ASC payment system or to physician offices under the Physician Fee Schedule (PFS) for the same services. As discussed in section X.A. of this final rule with comment period, CMS has taken steps to address payment disparities between hospital outpatient departments and the physician office setting. While we believe that our regulatory efforts to control for unnecessary utilization in Medicare payments for OPD services has had a positive impact, there is evidence of continued growth in the volume of OPD services driven by site-of-service payment differentials. Building on the CY 2019 OPPS/ASC final rule with comment period policy for clinic visits, in section X.A. of this final rule with comment period we are finalizing our proposal to pay off-campus PBDs otherwise excepted under section 603 of the BBA at the equivalent of the site-specific PFS rate for drug administration services.

While we have implemented volume control policies to pay for certain hospital outpatient clinic visits at a rate closer to that under the PFS and proposed to expand this policy to drug administration services, we sought feedback in the CY 2026 OPPS/ASC proposed rule for future rulemaking on the development of a more systematic process for identifying ambulatory services at high risk of shifting to the hospital setting based on financial incentives rather than medical necessity and adjusting payments according. Specifically, we sought feedback on the following questions:

1. What items and services paid under the OPPS may have experienced unnecessary increases in volume? Should any policies that address those increases be more targeted to those services that have the most notable increases in volume indicative of shifting care from the ASC or physician office setting to the hospital OPD setting?

2. Should we limit OPPS payment for certain services to the payment made for that service under the ASC payment system or the PFS-- depending on the setting where the service is performed most frequently? We note that the OPPS currently does not have a payment policy to limit OPPS payment rates to the rate under ASC payment system for procedures that are predominantly performed in an ASC. For example, while a simple cataract removal with insertion of an intraocular lens is a commonly-performed hospital outpatient surgical procedure, 82 percent of all such procedures that Medicare beneficiaries receive are performed in an ASC setting. In general, ASC payment rates are roughly 55 percent of the payment rate under the OPPS (86 FR 63485).

3. If we were to adjust payment based on the setting-specific volume of ambulatory services, should we pay the ASC payment amount if the service is predominantly performed in the ASC setting; and if the service is predominantly performed in the physician office setting, should we continue to calculate the PFS-equivalent rate using a PFS relativity adjuster that we would periodically update?

4. In determining the setting in which a service is performed most frequently, should we use the most recent data available or should we use data that is 5 or even 10 years prior to the rate-setting year? For example, as noted above, the share of chemotherapy administration services billed under the OPPS increased from 35.2 percent to 51.9 percent between 2012 and 2021, so using only more recent data may lead to

the conclusion that most of these services take place in the hospital OPD setting, even if that was not historically true. For services that experienced this type of migration, we believe it may be prudent to attempt to address the accumulation of past unnecessary increases in volume rather than allow that shift and the underlying financial incentive that caused it to remain permanent. Should we use solely Medicare FFS data for our analysis or should we explore and potentially incorporate Medicare Advantage data into our work (to the extent feasible and practicable)?

5. How could we account for the availability of OPDs, ASCs, and physician offices in a geographic area when determining the setting in which a service is most frequently performed? If there is a shortage of one of these settings of care in a geographic area, would it be appropriate to tie payment for a service to a setting of care that may not be readily available to a beneficiary?

6. What are the best ways to address different packaging and bundling policies across ambulatory payment systems? The PFS has less packaging of ancillary items than the OPPS and ASC payment system and tends to provide separate payment more frequently. Conversely, certain surgical procedures that have a global code in the PFS may not be packaged in the OPPS or ASC payment systems and the packaging policies of the OPPS and ASC payment system are not based on the period of time elapsed before or after the procedure or service. We could consider retaining the original payment rate that would apply absent any expanded site neutral policies, or we could apply a payment adjustment that approximates the impact of the packaging policies in the payment system whose rate would apply to the item or service under the proposed ambulatory payment adjustment.

7. Should we exempt certain services from a larger site neutral policy if such services are delivered in relation to emergent care, trauma-related care, or other care where the hospital is the most appropriate setting regardless of whether the item or service is typically furnished in a different setting? We note that physicians are appropriately responsible for making site-of-service decisions based on their clinical expertise and may determine that the hospital OPD setting is most appropriate for their patient's circumstances regardless of the level of Medicare payment. We solicited comment on the best way to designate items and services as being emergent or trauma-related and whether to include other categories of care or circumstances where certain items or services would be most appropriately paid at the OPPS rate regardless of the typical setting of care where they are furnished.

8. Should we apply OPPS site neutral policies more broadly to all hospital OPDs or should we instead consider applying this payment adjustment to only certain hospital OPDs, such as excepted off-campus hospital PBDs?

9. Should we exempt certain types of hospitals from a larger site neutral policy, such as rural Sole Community Hospitals, Medicare Dependent Hospitals, or Rural Emergency Hospitals? Currently, rural Sole Community Hospitals are exempted from the clinic visit site neutrality policy and instead are paid the full OPPS rate when such visits are furnished in excepted off-campus PBDs of these hospitals.

10. What other methods may be warranted to control unnecessary increases in the volume of outpatient services besides changes to payment rates, including prior authorization or other utilization management policies?

11. What impact would the proposed ambulatory payment adjustment have on beneficiaries and the health care market, including the development of or beneficiary access to new health care innovations?

We received approximately 43 pieces of correspondence that were submitted in response to the RFI questions. We thank all interested parties for their comments and may take them into consideration for future rulemaking.

C. Virtual Direct Supervision of Cardiac Rehabilitation (CR), Intensive Cardiac Rehabilitation (ICR), Pulmonary Rehabilitation (PR) Services and Diagnostic Services Furnished to Hospital Outpatients

1. Background a. Virtual Direct Supervision of CR, ICR and PR Services Furnished to Hospital Outpatients (42 CFR 410.27(a)(1)(iv)(B)(1))

In the interim final rule with comment period titled “Policy and Regulatory Provisions in Response to the COVID-19 Public Health Emergency,” published on April 6, 2020 (the April 6th COVID-19 IFC) (85 FR 19230, 19246, 19286), we changed the regulation at 42 CFR 410.27(a)(1)(iv)(D) \207\ to provide that, during a Public Health Emergency (PHE) as defined in 42 CFR 400.200, the presence of the physician for purposes of the direct supervision requirement for PR, CR, and ICR services includes virtual presence through audio/video real-time communications technology when use of such technology is indicated to reduce exposure risks for the beneficiary or health care provider. Specifically, the required direct physician supervision can be provided through virtual presence using audio/video real-time communications technology (excluding audio-only) subject to the clinical judgment of the supervising practitioner. We further amended Sec. 410.27(a)(1)(iv)(B) \208\ in the CY 2021 OPPS/ASC final rule with comment period to provide that this flexibility continues until the later of the end of the calendar year in which the PHE as defined in Sec. 400.200 ends or December 31, 2021 (85 FR 86113 and 86299). In the CY 2021 OPPS/ASC final rule with comment period we also clarified that this flexibility excluded the presence of the supervising practitioner via audio-only telecommunications technology (85 FR 86113).

\207\ In the CY 2023 OPPS/ASC final rule with comment period, we removed Sec. 410.27(a)(1)(iv)(D) in its entirety and added its language regarding pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac rehabilitation services and the virtual presence of a physician through audio/video real-time communications technology during the PHE to the newly designated Sec. 410.27(a)(1)(iv)(B)(1) (87 FR 72024).

\208\ Ibid.

In the CY 2023 OPPS/ASC final rule with comment period, we finalized a policy to extend the revised definition of direct supervision of CR, ICR, and PR services to include the presence of the supervising physician through two-way, audio/video telecommunications technology (excluding audio-only) until December 31, 2023 (87 FR 72019 and 72020).

In the CY 2024 OPPS/ASC final rule with comment period, we finalized a policy to further revise Sec. 410.27(a)(1)(iv)(B)(1) to continue to allow for the direct supervision requirement for CR, ICR, and PR services to include the virtual presence of the physician through audio-video real-time communications technology (excluding audio-only) through December 31, 2024 and to extend this policy to the nonphysician practitioners, that is NPs, PAs, and CNSs, who were eligible to supervise these services beginning in CY 2024 (88 FR 81863 through 81867).

In the CY 2025 OPPS/ASC final rule with comment period, we finalized a policy to continue to allow for the direct supervision of CR, ICR, PR services to include the virtual presence of the physician (or other nonphysician practitioner) through audio-video real-

time communications technology (excluding audio-only) through December 31, 2025 (89 FR 94280). b. Virtual Direct Supervision of Diagnostic Services Furnished to Hospital Outpatients (42 CFR 410.28(e)(2)(iii))

In the April 6th, 2020 COVID-19 IFC, for consistency with the revisions made to 42 CFR 410.27(a)(1)(iv)(D) \209\ described above and Sec. 410.32(b)(3)(ii) (revising the definition of direct supervision of diagnostic services furnished in a physician's office to include virtual supervision for the duration of the PHE), we changed the regulation at 42 CFR 410.28(e) to provide that, during a PHE as defined in 42 CFR 400.200, the presence of the physician for purposes of the direct supervision requirement for diagnostic services includes virtual presence through audio/video real-time communications technology when use of such technology is indicated to reduce exposure risks for the beneficiary or health care provider (85 FR 19245 and 19246).

\209\ https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-410/subpart-B/section-410.27#p-410.27(a)(1)(iv)(D).

To ensure consistency with additional revisions made to 42 CFR 410.27(a)(1)(iv)(B)(1) and 410.32(b)(3)(ii) extending the end date of the flexibility allowing for the virtual supervision of the services governed by those regulations, the CY 2023 OPPS/ASC final rule with comment period (87 FR 72024 through 72026), CY 2024 OPPS/ASC final rule with comment period (88 FR 81866 and 81867), and CY 2025 OPPS/ASC final rule with comment period (89 FR 94278 and 94280) subsequently extended the end date of the flexibility allowing for direct supervision to include the virtual supervision of outpatient diagnostic services through audio/video real-time communications technology (excluding audio-only) through December 31, 2025. 2. CY 2026 Virtual Direct Supervision of CR, ICR, PR Services and Diagnostic Services Furnished to Hospital Outpatients

In the CY 2026 PFS proposed rule (90 FR 32393 through 32395), we proposed to revise the definition of direct supervision at Sec. 410.26(a)(2) and Sec. 410.32(b)(3)(ii) to make permanent the availability of virtual direct supervision of therapeutic and diagnostic services under the PFS, except for services that have a global surgery indicator of 010 or 090. This information can be found in the PFS PPRVU public use file (https://www.cms.gov/medicare/payment/fee-schedules/physician/pfs-relative-value-files). These global surgery indicators are defined in IOM Pub. 100-04, chapter 23, section 50.6 as 010 “Minor procedure with preoperative relative values on the day of the procedure and postoperative relative values during a 10-day postoperative period included in the fee schedule amount; evaluation and management services on the day of the procedure and during this 10- day postoperative period generally not payable” and 090 “Major surgery with a 1-day preoperative period and 90-day postoperative period included in the fee schedule payment amount”. As explained in that rule, this proposal was made in response to overwhelming support and requests to extend this policy permanently for a wider set of services than the ones that were finalized in the CY 2025 PFS final rule and would build on the incremental approach of making the virtual supervision of certain services permanent which we began in the CY 2025 PFS final rule. As noted in the CY 2026 PFS proposed rule, we believed that adopting this approach would recognize that virtual supervision has been available and widely utilized since the beginning of the PHE while excluding certain services to ensure quality of care and patient safety, and in particular, the ability of the supervising practitioner to intervene if complications arise, particularly in complex, high-risk instances where unexpected or adverse events may occur or for procedures that may be riskier or more intense since a patient's clinical status can quickly change. For the complete discussion of the proposed revisions to Sec. 410.26(a)(2) and Sec. 410.32(b)(3)(ii), we refer readers to the CY 2026 PFS proposed rule (90 FR 32393 through 32395).

In addition to desiring uniformity under the PFS and OPPS in how regulations are applied to similarly situated clinicians and providers, we agreed in the CY 2026 OPPS proposed rule that the approach proposed in the CY 2026 PFS proposed rule struck the appropriate balance between recognizing that the virtual supervision of diagnostic services has been available and widely utilized since the beginning of the PHE and ensuring quality of care and patient safety. Consequently, we proposed to revise Sec. 410.27(a)(1)(iv)(B)(1) and Sec. 410.28(e)(2)(iii) to make the availability of the direct supervision of CR, ICR, PR services and diagnostic services via audio-video real-time communications technology (excluding audio-only) permanent, except for diagnostic services that have a global surgery indicator of 010 or 090. We noted in the CY 2026 OPPS/ASC proposed rule that permanently adopting a definition of direct supervision that allows “immediate availability” of the supervising practitioner using audio/video real-time communications technology (excluding audio-only), for CR, ICR, PR and diagnostic services described under Sec. 410.28, except for diagnostic services that have a global surgery indicator of 010 or 090 did not mean that it was appropriate to allow virtual presence for every service for every Medicare beneficiary in every clinical scenario. As always, we stated, the physician or nonphysician practitioner should use his or her complex professional judgment to determine the appropriate supervision modality on a case-by-case basis.

We received public comments on this proposal. The following is a summary of the comments we received and our responses to those comments.

Comment: Nearly all commenters supported our proposal to revise Sec. 410.27(a)(1)(iv)(B)(1) and Sec. 410.28(e)(2)(iii) to make the availability of the direct supervision of CR, ICR, PR services and diagnostic services via audio-video real-time communications technology (excluding audio-only) permanent, except for diagnostic services that have a global surgery indicator of 010 or 090. These commenters stated that virtual direct supervision does not inherently give rise to patient safety issues and indicated that making the availability of virtual direct supervision permanent would improve patient access to historically underutilized services, particularly in rural and other underserved areas where workforce shortages remain acute, enhance workforce efficiency, reduce burden on providers, provide the certainty needed to maintain existing programs and encourage new adoption by rural providers who may have been hesitant. Several of these commenters suggested additional refinements to the proposal such as retiring the requirement for a service-level modifier to identify when direct supervision is provided via appropriate telehealth technology, more precisely defining “immediate availability” in the context of virtual direct supervision, adding a requirement that virtual supervision of CR and ICR services be preceded by an in-person E/M consultation for the development of a care plan for which CR or ICR services will be rendered and ensuring that trained and authorized

staff are present in the event of an adverse reaction to injected contrast.

Response: We thank commenters for their support and suggestions of how we might refine our policy and will take their input under consideration for future rulemaking.

Comment: One commenter opposed the proposal. Reiterating concerns previously expressed in comments to the CY 2025 OPPS/ASC final rule with comment period, the commenter opposed our proposal to permanently allow for the virtual direct supervision of CR, ICR, PR and diagnostic services because doing so would increase the amount of physician “incident to” billing (a Medicare billing provision that applies in the office or clinic setting and allows medical services to be performed by auxiliary personnel as an incident to the services of the billing practitioner and under their supervision) for services provided by Physician Assistants (PAs) and Nurse Practitioners (NPs), which would obscure the extent to which PAs and NPs are actually performing the services. This commenter suggested that CMS allow for virtual supervision only of medical professionals who are unauthorized to bill Medicare or, alternatively, establish a method through which CMS is able to collect the information of the health professional actually providing the service under “incident to.”

Response: We appreciate the commenter's input regarding the appropriate attribution of services performed by PAs and NPs when those services are billed “incident to” a physician's service. However, we note that these nonphysician practitioners (as well as clinical nurse specialists (CNSs)) are authorized by statute to supervise these services and we think that any potential obscuration of the extent to which PAs and NPs are providing virtual direct supervision resulting from incident to billing is outweighed by the flexibility and enhanced access to services resulting from allowing these practitioners to provide virtual direct supervision. We are also not persuaded that the commenter's concerns warrant CMS establishing a method through which we would collect the information of the health professional actually providing the service under “incident to.”

Comment: Several commenters requested that CMS make clear that Advanced Practice Registered Nurses can conduct virtual direct supervision of rehabilitation services in hospital outpatient settings.

Response: PAs, NPs and CNSs can conduct virtual direct supervision of CR, ICR and PR in hospital outpatient settings. Section 410.27(a)(1)(iv)(B)(1) defines direct supervision for the purpose of therapeutic services provided in the outpatient setting and states that “[f]or pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac rehabilitation services, direct supervision must be furnished as specified in Sec. Sec. 410.47 and 410.49, respectively.” Sections 410.47(a) and 410.49(a), specifically list the individual practitioners (PA, NP, and CNS) that are included in the term “nonphysician practitioner” for the purposes of the supervision of ICR, CR and PR.

Comment: One commenter requested that CMS continue to monitor the impact of virtual direct supervision to ensure it supports high quality, safe and accessible diagnostic care for all beneficiaries. Another commenter suggested that CMS monitor outcomes such as patient satisfaction, program completion rates, and safety indicators to ensure quality is maintained.

Response: We appreciate the commenters' concerns about monitoring the impact of virtual direct supervision to ensure quality of care. We plan on continuing to do so.

Comment: Several commenters, as they have in comments to previous proposed rules, advocated for the removal of what they refer to as referral barriers to certain non-physician practitioners ordering CR, ICR, PR. These commenters point out that while NPs, PAs and CNSs can supervise CR, ICR and PR services, they cannot order those services for Medicare patients. These commenters identify CMS' previous interpretation of “physician-prescribed exercise” under section 1861(fff)(2)(A) of the Act (for PR) and section 1861(eee)(3)(A) of the Act (for CR/ICR) as the barrier preventing NA, PAs and CNSs from referring patients to CR, ICR, and PR services and stated that CMS should change its interpretation of these sections of the statute to allow these practitioners to order CR, ICR, and PR services. One commenter stated that CMS can interpret “physician-prescribed” to allow NAs, PAs and CNSs to order CR, ICR and PR services because there is a distinction between the referral for physician-prescribed exercise and the physician's prescription for exercise.

Response: As we have explained previously in the CY 2024 OPPS/ASC final rule with comment period (88 FR 81864 through 81865) and CY 2024 PFS final rule (88 FR 79088), we do not believe that there is a reasonable interpretation of the statute that would allow NAs, PAs and CNSs to order CR, ICR, and PR services. We encourage interested parties to work with the Congress to explore further statutory changes to support these requests.

Comment: Several commenters encouraged CMS to consider additional services that could be safely supervised virtually in future years, additional policies that might support virtual care in the hospital outpatient setting and the possibility of reinstating the virtual delivery of CR, ICR, and PR services furnished by hospital outpatient departments.

Response: We thank the commenter for their input and will consider taking it under consideration in future rulemaking.

Comment: One commenter requested that CMS extend the definition of direct supervision to include real-time virtual presence via audio/ video technology for all therapeutic radiation therapy services for sites of service paid under the OPPS and MPFS.

Response: We thank the commenter for their comment and note that for therapeutic services under Sec. 410.27, ICR, CR and PR, are the only services that are subject to direct supervision requirements when furnished to hospital outpatients.

After consideration of the public comments we received, we are finalizing, without modification, our proposal to revise Sec. 410.27(a)(1)(iv)(B)(1) and Sec. 410.28(e)(2)(iii) to make the availability of the direct supervision of CR, ICR, PR services and diagnostic services via audio-video real-time communications technology (excluding audio-only) permanent, except for diagnostic services that have a global surgery indicator of 010 or 090.