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

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50944 through 50952), we clarified our policy regarding when an inpatient admission is considered reasonable and necessary for purposes of Medicare Part A payment. Under this policy, we established a benchmark providing that surgical procedures, diagnostic tests, and other treatments would be generally considered appropriate for payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights and admits the patient as an inpatient based upon that expectation. Conversely, when a beneficiary enters a hospital for a surgical procedure not designated as an

inpatient-only (IPO) procedure as described in 42 CFR 419.22(n), a diagnostic test, or any other treatment, and the physician expects to keep the beneficiary in the hospital for only a limited period of time that does not cross 2 midnights, the services would be generally inappropriate for payment under Medicare Part A, regardless of the hour that the beneficiary came to the hospital or whether the beneficiary used a bed. With respect to services designated under the OPPS as IPO procedures, we explained that because of the intrinsic risks, recovery impacts, or complexities associated with such services, these procedures would continue to be appropriate for payment under Medicare Part A regardless of the expected length of stay. We also indicated that there might be further “rare and unusual” exceptions to the application of the benchmark, which would be detailed in subregulatory guidance.

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50944 through 50952), we also finalized the 2-midnight presumption, which is related to the 2-midnight benchmark but is a separate medical review policy. The 2-midnight benchmark represents guidance to reviewers to identify when an inpatient admission is generally reasonable and necessary for purposes of Medicare Part A payment, while the 2-midnight presumption relates to instructions to medical reviewers regarding the selection of claims for medical review. Specifically, under the 2-midnight presumption, inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order are presumed to be appropriate for Medicare Part A payment and are not the focus of medical review efforts, absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. We refer readers to the CY 2021 OPPS/ASC final rule with comment period for additional discussion about the distinction between the 2-midnight presumption and benchmark (85 FR 86113 through 86114).

In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70538 through 70545), we revisited the previous rare and unusual exceptions policy and finalized a proposal to allow for case-by-case exceptions to the 2-midnight benchmark, whereby Medicare Part A payment may be made for inpatient admissions where the admitting physician does not expect the patient to require hospital care spanning 2 midnights, if the documentation in the medical record supports the physician's determination that the patient nonetheless requires inpatient hospital care. We stated that the following criteria would be relevant to determining whether an inpatient admission with an expected length of stay of less than 2 midnights is nonetheless appropriate for Medicare Part A payment:

Complex medical factors such as history and comorbidities;

The severity of signs and symptoms;

Current medical needs; and

The risk of an adverse event.

In other words, for purposes of Medicare payment, an inpatient admission is payable under Part A if the documentation in the medical record supports either the admitting physician's reasonable expectation that the patient will require hospital care spanning at least 2 midnights, or the physician's determination based on factors such as those identified previously that the patient nonetheless requires care on an inpatient basis. The exceptions for procedures on the IPO list and for “rare and unusual” circumstances designated by CMS as national exceptions were unchanged by the CY 2016 OPPS/ASC final rule with comment period.

As we stated in the CY 2016 OPPS/ASC final rule with comment period, the decision to formally admit a patient to the hospital is subject to medical review. Specifically, for inpatient admissions not related to a surgical procedure specified by Medicare as an IPO procedure under Sec. 419.22(n) and for which there is not a national exception, payment of the claim under Medicare Part A is subject to the clinical judgment of the medical reviewer to determine whether the medical record supports a reasonable expectation of the need for hospital care crossing at least 2 midnights or otherwise supports a need for inpatient care. The medical reviewer's clinical judgment involves the synthesis of all submitted medical record information (for example, progress notes, diagnostic findings, medications, nursing notes, and other supporting documentation) to make a medical review determination on whether the clinical requirements in the relevant policy have been met. In addition, Medicare review contractors must abide by CMS' policies in making payment determinations. While Medicare review contractors may continue to use commercial screening tools to help evaluate the inpatient admission decision for purposes of payment under Medicare Part A, such tools are not binding on the hospital, CMS, or its review contractors. This type of information also may be appropriately considered by the physician as part of the complex medical judgment that guides his or her decision to keep a beneficiary in the hospital and formulation of the expected length of stay. 2. Current Policy for Medical Review of Inpatient Hospital Admissions for Procedures Removed From the Inpatient Only List

In the CY 2020 OPPS/ASC final rule with comment period, we finalized a policy to exempt procedures that have been removed from the IPO list from certain medical review activities to assess compliance with the 2-midnight rule within the 2 calendar years following their removal from the IPO list. We stated that these procedures would be exempted from site-of-service claim denials under Medicare Part A, eligibility for Beneficiary and Family-Centered Care Quality Improvement Organizations (BFCC-QIOs) referrals to Recovery Audit Contractors (RACs) for noncompliance with the 2-midnight rule, and RAC reviews for “patient status” (that is, site-of-service). We explained that during this 2-year period, BFCC-QIOs would have the opportunity to review such claims in order to provide education for practitioners and providers regarding compliance with the 2-midnight rule, but claims identified as noncompliant would not be denied with respect to the site-of-service under Medicare Part A.

For CY 2021, in conjunction with our proposal to eliminate the IPO list, we modified our proposal to continue the 2-year exemption, and instead finalized a policy under which procedures removed from the IPO list on or after January 1, 2021, would be indefinitely exempted from the above described medical review activities. We explained that the elimination of the IPO list was a large-scale change that created brand new considerations for providers regarding site-of-service determinations. We believed a change of this significance required us to reevaluate our stance on the exemption period for procedures removed from the IPO list, resulting in our decision to finalize an indefinite exemption period rather than continuing the previous 2-year exemption period. We stated that this exemption would last with respect to each procedure removed from the IPO list until we had Medicare claims data indicating that the procedure was more commonly performed in the outpatient setting than the inpatient setting. Thus, for the exemption to end for a specific procedure, in a single calendar year we would need to have Medicare claims

data indicating that the procedure was performed more than 50 percent of the time in the outpatient setting. We noted that the end of the exemption period for each procedure removed from the IPO list on or after January 1, 2021 would be announced via rulemaking.

Consequently, in the CY 2021 OPPS/ASC final rule with comment period, we amended 42 CFR 412.3(d)(2) to clarify when a procedure removed from the IPO list is exempt from the identified medical review activities. To account for the previous exemption policy that was in effect for CY 2020, we added Sec. 412.3(d)(2)(i) which stated that for “those services and procedures removed between January 1 and December 31, 2020, this exemption will last for 2 years from the date of such removal.” To implement the change to an indefinite exemption period that we finalized in CY 2021, we added Sec. 412.3(d)(2)(ii) which stated that for “those services and procedures removed on or after January 1, 2021, this exemption will last until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting.”

In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63736 through 63740), given our decision in that rule to halt the elimination of the IPO list, and the fact that we were accordingly no longer removing an unprecedented number of procedures from the list at one time, we proposed to return to the 2-year exemption period from the specified medical review activities for procedures removed from the IPO list. Under the circumstances of that final rule with comment period, we believed that a 2-year exemption period was adequate to enable providers to gain experience with the application of the 2-midnight rule to those procedures that have been newly removed from the IPO list. We also stated that we believed that a 2-year exemption from the medical review activities was also sufficient time for providers and BFCC-QIOs to understand the documentation necessary to support Part A payment for those patients for which the admitting physician determines that the procedures should be furnished in an inpatient setting.

In the preamble to the CY 2022 OPPS/ASC final rule with comment period (86 FR 63739), we stated that we were amending Sec. 412.3(d)(2) to clarify “that for all services and procedures removed after January 1, 2020, this exemption would last for 2 years from the date of such removal. This would include those services and procedures removed on or after January 1, 2021, for which this exemption would also be for 2 years from the date of such removal”. Accordingly, Sec. 412.3(d)(2)(i) was revised to read “for those services and procedures removed on or after January 1, 2020, the exemption in this paragraph (d)(2) will last for 2 years from the date of such removal.” However, due to a drafting oversight, we failed to correspondingly remove Sec. 412.3(d)(2)(ii): “For those services and procedures removed on or after January 1, 2021, the exemption in this paragraph (d)(2) will last until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting.” As a result of this error, the exemption period was not changed to two years as we intended and instead remained the indefinite exemption period that was finalized in the CY 2021 OPPS/ASC final rule with comment period. 3. Medical Review of Inpatient Hospital Admissions for Procedures Removed From the Inpatient Only List for CY 2026 and Subsequent Years

As stated earlier in this section, services on the IPO list are not subject to the 2-midnight rule for purposes of determining whether payment is appropriate under Medicare Part A. However, the 2-midnight rule is applicable once services have been removed from the IPO list. Outside of the exemption periods discussed above, services that have been removed from the IPO list are currently subject to initial medical reviews of claims for short-stay inpatient admissions conducted by Medicare review contractors.\210\

\210\ On May 22, 2025, CMS announced that responsibility for short-stay reviews will be transitioned from the BFCC-QIOs to the MACs, as of September 1, 2025. https://www.cms.gov/data-research/monitoring-programs/medicare-fee-service-compliance-programs/medical-review-and-education/hospital-patient-status-reviews. BFCC- QIOs will continue to review post-payment inpatient hospital claims for higher weighted Diagnosis Related Groups, hospital discharge and service termination appeals, and quality of care concerns. While the BFCC-QIO will not specifically select short stay claims for the purpose of assessing compliance with the two-midnight rule, if the BFCC-QIO encounters a hospital short inpatient stay claim when reviewing for other reasons, the medical record will also be reviewed for compliance with the two-midnight rule.

MACs' current typical process is to perform reviews on a sample of Medicare pre-payment Part A claims as part of the MAC Targeted Probe and Educate (TPE) program. For more details on this program see: https://www.cms.gov/data-research/monitoring-programs/medicare-fee-service-compliance-programs/medical-review-and-education/targeted-probe-and-educate-tpe. MACs may refer any provider that fails to improve after three rounds of targeted audits and education to CMS for next steps. CMS actions may include additional prepay review, extrapolation, referral to a Recovery Auditor, or other action.

However, as finalized in the CY 2021 OPPS/ASC final rule with comment period, procedures that have been removed from the IPO list on January 1, 2021 or later were indefinitely exempted from site-of- service claim denials under Medicare Part A, eligibility for referrals to RACs for noncompliance with the 2-midnight rule, and RAC reviews for “patient status” (that is, site-of-service). We stated that this exemption would last for each procedure until we have Medicare claims data indicating that the procedure is more commonly performed in the outpatient setting than the inpatient setting.

As stated in section IX. of the CY 2026 OPPS/ASC proposed rule, we proposed to eliminate the IPO list in CY 2026 with a transitional period of 3 years. For CY 2026, we proposed to remove all musculoskeletal procedures from the IPO list. Prior to the CY 2020 exemption for services removed from the IPO list, the elimination of the IPO list would have meant that procedures currently on the IPO list would be subject to the 2-midnight rule (both the 2-midnight benchmark and 2-midnight presumption) upon removal from the IPO list.

We believe that with the elimination of the IPO list, which we are finalizing, as discussed in section IX. of this final rule with comment period, the 2-midnight benchmark remains an important metric to help guide when Part A payment for inpatient hospital admissions is appropriate. As technology advances and more services may be safely performed in the hospital outpatient setting and paid under the OPPS, it is increasingly important for physicians to exercise their clinical judgment in determining the appropriate clinical setting for their patient to receive a procedure, whether that be as an inpatient or on an outpatient basis. Importantly, removal of a service from the IPO list has never meant that a beneficiary cannot receive the service as a hospital inpatient--as always, the physician should use his or her complex medical judgment to determine the appropriate setting on a case-by-case basis.

As finalized in the CY 2021 OPPS/ASC final rule with comment period, procedures removed from the IPO list after January 1, 2021, were indefinitely exempted from site-of-service claim denials under Medicare Part A,

eligibility for Medicare review contractor referrals to RACs for noncompliance with the 2-midnight rule, and RAC reviews for “patient status” (that is, site-of-service). These procedures are not considered by the Medicare review contractors in determining whether a provider exhibits persistent noncompliance with the 2-midnight rule for purposes of referral to the RAC nor will claims for these procedures be reviewed by RACs for “patient status.” During the exemption period, Medicare review contractors have the opportunity to review such claims in order to provide education for practitioners and providers regarding compliance with the 2-midnight rule, but claims identified as noncompliant are not denied with respect to the site-of-service under Medicare Part A. Again, information gathered by the Medicare review contractor when reviewing procedures as they are newly removed from the IPO list can be used for educational purposes but will not result in a claim denial during the exemption period.

When we previously finalized elimination of the IPO list in the CY 2021 OPPS/ASC final rule with comment period, we received numerous comments that suggested a longer exemption period would be appropriate, due to the unprecedented volume of procedures becoming subject to the 2-midnight rule. Therefore, we finalized an indefinite exemption period for procedures removed from the IPO list during the 3-year transition from the list to allow providers to become more familiar with how to comply with the 2-midnight rule and with the availability of payment under both the hospital inpatient and outpatient payment systems for procedures removed from the IPO list. Our proposal in the CY 2026 OPPS/ ASC proposed rule to eliminate the IPO list over a 3-year period warranted similar considerations. Accordingly, we proposed to maintain the indefinite exemption period under 42 CFR 412.3(d)(2)(ii) for procedures that are removed from the IPO list that is currently in effect. In the interest of clarity, we proposed to delete Sec. 412.3(d)(2)(i) and (ii) and revise Sec. 412.3(d)(2) to read “An inpatient admission for a surgical procedure specified by Medicare as inpatient only under Sec. 419.22(n) of this chapter is generally appropriate for payment under Medicare Part A regardless of the expected duration of care. Procedures no longer specified as inpatient only under Sec. 419.22(n) of this chapter are appropriate for payment under Medicare Part A in accordance with paragraph (d)(1) or (3) of this section. Claims for services and procedures removed from the inpatient only list under Sec. 419.22 of this chapter on or after January 1, 2021 are exempt from certain medical review activities until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting.” As indicated in the CY 2021 OPPS/ASC final rule with comment period, the determination of the Secretary that a service or procedure is more commonly performed in the outpatient setting is based on claims data that demonstrates that the service or procedure is being performed more than 50 percent of the time in the outpatient setting in a single calendar year (85 FR 86117 and 86119). We noted in the CY 2026 OPPS/ASC proposed rule, that this would be an exemption from certain medical review activities, not an exception to the 2-midnight rule. Providers are still required to comply with the 2-midnight rule during the exemption period, and CMS or its contractors may still conduct patient status medical review in cases in which there is evidence of systemic fraud or abuse occurring. Additionally, we noted that other types of medical review, unrelated to patient status, would not be impacted by the proposed exemption. We proposed to announce in subregulatory guidance when the exemption is ending for a particular service or procedure prior to the effective date of the end of the exemption for the particular service or procedure. We invited commenters to indicate whether and why they believed an indefinite exemption period, or another time period, would be most appropriate.

In summary, for CY 2026 and subsequent years, we proposed to continue the indefinite exemption from site-of-service claim denials, initial medical review contractor referrals to RACs, and RAC reviews for “patient status” (that is, site-of-service) finalized in the CY 2021 OPPS/ASC final rule with comment period for procedures that are removed from the IPO list in CY 2021 or later under the OPPS. We also proposed to remove Sec. 412.3(d)(2)(i) and (ii) and revise Sec. 412.3(d)(2) to clarify that claims for services and procedures removed from the IPO list on or after January 1, 2021 are exempt from certain medical review activities until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting than the inpatient setting. Finally, we sought comment on whether other exemption periods may be warranted.

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

Comment: Many commenters supported our proposal to continue the indefinite exemption from site-of-service claim denials, initial medical review contractor referrals to RACs, and RAC reviews for “patient status” (that is, site-of-service) finalized in the CY 2021 OPPS/ASC final rule with comment period for procedures that are removed from the IPO list in CY 2021 or later under the OPPS. Some of these commenters stated that maintaining this exemption would help ensure that providers are not penalized for exercising clinical discretion and alleviate concerns regarding 2-midnight audits and claims denials from influencing the site of-surgery. One of these commenters stated that by acknowledging the foremost expertise of physicians in determining the most appropriate site of care through this indefinite exemption along with other existing policies related to the 2-midnight rule, CMS is taking an important step toward increasing choice and improving quality of care. Other commenters noted that the proposal would facilitate a smoother transition for procedures newly eligible for outpatient reimbursement, allow time for practice patterns and infrastructure to adapt, reduce confusion and avoid additional, unnecessary administrative burden on physicians. One commenter indicated that the exemption period was necessary to ensure that physicians are appropriately educated on the change of policy and to inform facilities and their compliance departments on the totality of the 2-midnight rule and all of its exceptions. Another commenter underscored the importance of the proposal because it appropriately recognizes the unprecedented volume of procedures that would newly be subject to the 2-midnight rule if the IPO list is eliminated.

Response: We thank commenters for their support.

Comment: One commenter supported an indefinite exemption but expressed concern that the exemption would end when CMS determines that the service or procedure is more commonly performed in the Medicare population in the outpatient setting. The commenter's concern was that certain patients may require inpatient level care, including intensive care unit (ICU) level care, even if some patients may appropriately receive the service in a lower-acuity setting.

Response: We appreciate the commenter's concern and emphasize, as

we did in the CY 2016 final OPPS/ASC rule, that that the 2-midnight benchmark does not override the clinical judgment of the physician regarding the need to keep the beneficiary at the hospital, to order specific services, or to determine appropriate levels of nursing care or physical locations within the hospital. This physician judgment is recognized in 42 CFR 412.3(d)(3) which states that “[w]here the admitting physician expects a patient to require hospital care for only a limited period of time that does not cross 2 midnights, an inpatient admission may be appropriate for payment under Medicare Part A based on the clinical judgment of the admitting physician and medical record support for that determination.” Even when a procedure loses its exemption from certain medical review activities as a result of being determined by the Secretary to be more commonly performed in the outpatient setting, it can still be deemed appropriate for payment under Medicare Part A under 42 CFR 412.3(d)(3) for patients the physician has determined need to receive the service in an inpatient setting despite the physician not having the expectation that the inpatient stay will cross 2 midnights.

Comment: Many commenters asked for additional clarification on the proper application of the case-by-case exception to the 2-midnight benchmark under 42 CFR 412.3(d)(3). This exception allows for Medicare Part A payment on a case-by-case basis for inpatient admissions that do not satisfy the 2-midnight benchmark, if the documentation in the medical record supports the admitting physician's determination that the patient requires inpatient hospital care despite an expected length of stay that is less than 2 midnights. Most of these commenters emphasized that this additional clarity was necessary due to Medicare Advantage plans historically ignoring the 2-midnight rule.

Response: CMS has recently reminded the Medicare Administrative Contractors (MACs) responsible for conducting inpatient short stay medical reviews of CMS' longstanding policy that recognizes the important role of physician judgment and individual patient needs in the hospital admission decision-making process. Providers should ensure that they clearly articulate in the medical record their rationale for admission to assist reviewers in understanding why admission for inpatient care is appropriate despite an expected length of stay that is less than two midnights. In other words, the medical record should reflect exactly what the current medical needs and/or other complex medical factors are that the physician/qualified practitioner is concerned about which would justify a case-by-case exception to the two-midnight rule (that is, that inpatient care is needed, despite an expected length of stay that is less than two midnights).

CMS has also instructed the MACs to continue to follow other longstanding guidance that they review the reasonableness of the inpatient admission for the purposes of Part A payment based on the information known to the physician at the time of admission. We have informed the MACs that the expectation of time and the determination of the underlying need for inpatient care despite an expected length of stay that is less than two midnights should be supported by patient- specific complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. MACs will expect such factors to be documented in the medical record. The entire medical record may be reviewed to support or refute the reasonableness of the physician's/qualified practitioner's expectation, but entries after the point of the admission order are only used in the context of interpreting what the physician/qualified practitioner knew and expected at the time of admission. Additionally, we have provided guidance to MACs that comorbidities and other complex medical factors are to be considered in the context of their contribution to the need for hospital services.

With respect to commenters' concerns regarding Medicare Advantage plans ignoring the 2-midnight rule, we emphasize here, as we have previously, that Medicare Advantage plans are required to comply with the 2-midnight benchmark. In the final rule titled `Medicare Program; Contract Year 2024 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly” which appeared in the Federal Register on April 12, 2023 (88 FR 22120), we clarified that “MA plans must comply with general coverage and benefit conditions included in Traditional Medicare laws, unless superseded by laws applicable to MA plans” and that “this includes coverage criteria for inpatient admissions at 42 CFR 412.3 . . .” (88 FR 22191). We additionally stated that “[i]n regards to inpatient admissions at Sec. 412.3, we confirm that the criteria listed at Sec. 412.3(a)-(d) apply to MA.” (88 FR 22191). In that final rule, we codified this requirement by revising 42 CFR 422.101(b)(2) to state that each MA organization must comply “with general coverage and benefit conditions included in Traditional Medicare laws, unless superseded by laws applicable to MA plans. This includes criteria for determining whether an item or service is a benefit available under Traditional Medicare. For example, this includes payment criteria for inpatient admissions at 42 CFR 412.3 . . .”

Comment: Several commenters offered suggestions about how CMS should provide notice that an exemption period is ending for a service when the service has been determined by the Secretary to be more commonly performed in the outpatient setting. One commenter suggested a “transparent process of advance notification” for providers when a service has been determined to be more commonly performed in the outpatient setting. Two commenters stated that CMS should use notice and comment rulemaking, not sub-regulatory guidance as proposed, to end exemption periods. These commenters did not provide a reason for this recommendation, other than one commenter's statement that “[w]e oppose audit policy changes to procedures removed from the IPO list being issued through CMS or Medicare Area Contractor `guidance.' ” Two of these commenters additionally suggested that CMS include in this notice and comment rulemaking the quality and patient safety data it relied on to determine that the procedure can be safely performed in the outpatient setting. Two commenters urged CMS not to end the exemption until at least two years after the Secretary determines that the service is more commonly performed in the outpatient setting to allow hospitals time to update their billing systems and gain experience with respect to the newly removed procedures consistent with CMS' past practice with respect to procedures removed from the IPO list based on clinical considerations.

Response: We agree with the need for a transparent process of advance notification to the public when a service has been determined to be more commonly performed in the outpatient setting. We appreciate commenters' suggestion that such notice be provided through rulemaking rather than subregulatory guidance as well as their request for the exemption period to extend at least 2 years after the service has been determined to be more commonly performed in the outpatient setting. Since we have not yet gone

through the process of ending the exemption period for an indefinitely exempted procedure, we will establish that process, including the effective date of the end of the exemption period, through notice and comment rulemaking the first year that the Secretary determines that a procedure is more commonly performed in the outpatient setting than the inpatient setting. We will address the process for subsequent years at that time.

Comment: Three commenters supported the proposal but urged CMS to exempt hospitals that utilize certain clinical decision support tools from patient status review for the 2-midnight policy. The commenters argue that clinical decision support technology exists to achieve the same program integrity and patient safety goals as the 2-midnight rule without the uncertainty around coverage for patients.

Response: We appreciate the commenters' suggestion and enthusiasm for clinical decision support technology, however we do not think clinical decision support tools are an appropriate substitute for patient status review by CMS or Medicare review contractors for compliance with the 2-midnight rule.

Comment: One commenter noted that in our summary of major provisions section discussing our proposal to continue the indefinite exemption from the 2-midnight rule for certain medical review activities we referred to “Beneficiary and Family-Centered Care Quality Improvement Organization (BFCC-QIO) referrals to Recovery Audit Contractor (RAC).” The commenter indicated that since, as of September 1, 2025, those 2-midnight reviews will be performed by the MACs and not the BFCC-QIOs, the reference to BFCC-QIOs should be replaced with MACs.

Response: We thank the commenter for pointing this out and the change has been made.

After consideration of the public comments we received, we are finalizing our proposal with modification. We are finalizing our proposal to (1) continue the indefinite exemption from site-of-service claim denials, initial medical review contractor referrals to RACs, and RAC reviews for “patient status” (that is, site-of-service) finalized in the CY 2021 OPPS/ASC final rule with comment period for procedures that are removed from the IPO list in CY 2021 or later under the OPPS; and (2) remove Sec. 412.3(d)(2)(i) and (ii) and revise Sec. 412.3(d)(2) to clarify that claims for services and procedures removed from the IPO list on or after January 1, 2021 are exempt from certain medical review activities until the Secretary determines that the service or procedure is more commonly performed in the outpatient setting than the inpatient setting. We are not finalizing our proposal to announce in subregulatory guidance when an exemption is ending for a particular service or procedure. Instead, the first time that the Secretary determines that a service or procedure is more commonly performed in the outpatient setting than the inpatient setting, we will make the announcement that the exemption is ending for the service or procedure through notice and comment rulemaking. We will address the process for subsequent years at that time.

We proposed to revise the section heading and paragraph (a) introductory text at Sec. 419.47 to correct two errors that occurred when this regulation was revised in the CY 2025 OPPS/ASC final rule with comment period (89 FR 94304 through 94307).

In the CY 2025 OPPS/ASC final rule with comment period, we finalized our proposal to codify our coding and payment policy for Category B Investigational Device Exemption (IDE) clinical trials with control arms through revisions to Sec. 419.47. Specifically, we revised Sec. 419.47's paragraph (a) introductory text to specify that our policy only applies to IDE studies with a placebo control arm and where a payment adjustment is necessary to preserve the scientific validity of such a study. However, in making these revisions, we inadvertently deleted existing regulatory text that was not changed in the CY 2025 OPPS/ASC final rule with comment period. Specifically, we inadvertently deleted Sec. 419.47(a)(1) “The Medicare coverage IDE study criteria in Sec. 405.212 of this chapter are met” and paragraph (2) “A new or revised code is necessary to preserve the scientific validity of such a study, such as by preventing the unblinding of the study.” Therefore, effective January 1, 2026, we proposed to amend the regulatory text at Sec. 419.47(a) to restore these two inadvertently removed paragraphs.

Additionally, in the CY 2025 OPPS/ASC final rule with comment period, we did not finalize our CY 2025 OPPS/ASC proposal to extend our coding and payment policy to drugs and devices that are being studied in clinical trials under a Coverage with Evidence Development (CED) National Coverage Determination (NCD) \211\ for which the trial includes a treatment and control arm for CY 2025. However, despite our intent to remove all proposed revisions relating to this extension of the policy in the final rule, we inadvertently revised the section heading at Sec. 419.47 to state that the policy applied to “devices/ drugs studies.” Since we did not finalize the policy for CY 2025, we proposed, effective January 1, 2026, to delete “and devices/drugs studies” from the section heading at Sec. 419.47.

\211\ https://www.cms.gov/medicare/coverage/evidence.

We note that the revisions described previously in this section to Sec. 419.47 were inadvertently omitted from the proposed regulation text in the CY 2026 OPPS/ASC proposed rule but that regulatory text has been included in this final rule with comment period.

We did not receive public comments on this proposal, and therefore, we are finalizing as proposed for CY 2026.

Payment status indicators (SIs) that we assign to HCPCS codes and APCs serve an important role in determining payment for services under the OPPS. They indicate whether a service represented by a HCPCS code is payable under the OPPS or another payment system and whether particular OPPS policies apply to the code.

For CY 2026 and subsequent years, we proposed to create a new status indicator “S1”. We proposed this new status indicator to indicate that a skin substitute product is paid separately from other procedure codes under the OPPS. We proposed to assign all existing HCPCS codes describing skin substitute products to status indicator “S1” for CY 2026. This policy is further discussed in section V.B.10. of this final rule with comment period. We solicited public comments on the proposed definitions of the OPPS payment status indicators for CY 2026. We did not propose to make any additional changes to the existing definitions of status indicators that were listed in Addendum D1 to the CY 2026 OPPS/ASC proposed rule, which is available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.

We did not receive any public comments related to the definition of status indicator “S1”. Therefore, we are finalizing our proposed definition for status indicator “S1” without modification for CY 2026. The final definition and payment status of status

indicator “S1” can be found in Table 122. [GRAPHIC] [TIFF OMITTED] TR25NO25.176

The complete list of CY 2026 payment status indicators and their definitions is displayed in Addendum D1 to this final rule with comment period, which is available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices. CY 2026 payment status indicator assignments for APCs and HCPCS codes are shown in Addendum A and Addendum B, respectively, to this final rule with comment period, which are available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.

We proposed to use four comment indicators for the CY 2026 OPPS. These comment indicators, “CH,” “NC,” “NI,” and “NP,” are in effect for CY 2025; and we proposed to continue their use in CY 2026. The proposed CY 2026 OPPS comment indicators are as follows:

“CH”--Active HCPCS code in current and next calendar year, status indicator and/or APC assignment has changed; or active HCPCS code that will be discontinued at the end of the current calendar year.

“NC”--New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year, as compared to current calendar year for which we requested comments in the CY 2026 OPPS/ASC proposed rule; final APC assignment; comments will not be accepted on the final APC assignment for the new code.

“NI”--New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year, as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code.

“NP”--New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year, as compared to current calendar year, proposed APC assignment; comments will be accepted on the proposed APC assignment for the new code.

We solicited public comments on our proposed definitions of the OPPS comment indicators for CY 2026.

We did not receive public comments on this provision, and therefore, we are finalizing those definitions without modification for CY 2026. The definitions of OPPS comment indicators for CY 2026 are listed in Addendum D2 to this final rule with comment period, which is available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.

We update the lists and payment rates for covered surgical procedures and covered ancillary services in ASCs in conjunction with the annual proposed and final rulemaking process to update the OPPS and the ASC payment systems (Sec. 416.173; 72 FR 42535). We base ASC payment and policies for most covered surgical procedures, drugs, biologicals, and certain other covered ancillary services on the OPPS payment policies, and we use quarterly change requests (CRs) to update services paid for under the OPPS. We also provide quarterly update CRs for ASC covered surgical procedures and covered ancillary services throughout the year (January, April, July, and October). We release new and revised Level II HCPCS codes and recognize the release of new and revised CPT codes by the American Medical Association (AMA) and make these codes effective (that is, the codes are recognized on Medicare claims) via these ASC quarterly update CRs. We recognize the release of new and revised Category III CPT codes in the July and January CRs. These updates implement newly created and revised Level II HCPCS and Category III CPT codes for ASC payments and update the payment rates for separately paid drugs and biologicals based on the most recently submitted ASP data. New and revised Category I CPT codes, except vaccine codes, are released only once a year, and are implemented only through the January quarterly CR update. New and revised Category I CPT vaccine codes are released twice a year and are implemented through the January and July quarterly CR updates. We refer readers to Table 41 in the CY 2012 OPPS/ASC proposed rule for an example of how this process is used to update HCPCS and CPT codes, which we finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 42291; 76 FR 74380 through 74384).

In our annual updates to the ASC list of covered surgical procedures and covered ancillary services, we undertake a review of excluded surgical procedures, new codes, and codes with revised descriptors, to identify any that we believe meet the criteria for designation as ASC covered surgical procedures or covered ancillary services. Updating the lists of ASC covered surgical procedures and covered ancillary services, as well as their payment rates, in association with the annual OPPS rulemaking cycle, is particularly important because the OPPS relative payment weights and, in some cases, payment rates, are used as the basis for the payment of many covered surgical procedures and covered ancillary services under the revised ASC payment system. This joint update process ensures that the ASC updates occur in a regular, predictable, and timely manner.

Payment for ASC procedures, services, and items are generally based on medical billing codes, specifically, HCPCS codes, that are reported on ASC claims. The HCPCS is divided into two principal subsystems, referred to as Level I and Level II. Level I is comprised of CPT (Current Procedural Terminology) codes, a numeric and alphanumeric coding system maintained by the AMA, and includes Category I, II, and III CPT codes. Level II of the HCPCS, which is maintained by CMS, is a standardized coding system that is used primarily to identify products, supplies, and services not included in the CPT codes. Together, Level I and II HCPCS codes are used to report procedures, services, items, and supplies under the ASC payment system. Specifically, we recognize the following codes on ASC claims:

Category I CPT codes, which describe surgical procedures, diagnostic and therapeutic services, and vaccine codes;

Category III CPT codes, which describe new and emerging technologies, services, and procedures; and

Level II HCPCS codes (also known as alpha-numeric codes), which are used primarily to identify drugs, devices, supplies, temporary procedures, and services not described by CPT codes.

We finalized a policy in the August 2, 2007 ASC final rule with comment period (72 FR 42533 through 42535) to evaluate each year all new and revised Category I and Category III CPT codes and Level II HCPCS codes that describe surgical procedures, and to make preliminary determinations during the annual OPPS/ASC rulemaking process regarding whether or not they meet the criteria for payment in the ASC setting as covered surgical procedures and, if so, whether or not they are office- based procedures. In addition, we identify new and revised codes as ASC covered ancillary services based upon the final payment policies of the revised ASC payment system. In prior rulemakings, we refer to this process as recognizing new codes. However, this process has always involved the recognition of new and revised codes. We consider revised codes to be new when they have substantial revision to their code descriptors that necessitate a change in the current ASC payment indicator. To clarify, we refer to these codes as new and revised in this CY 2026 OPPS/ASC proposed rule.

We have separated our discussion below based on when the codes are released and whether we propose to solicit public comments in the proposed rule (and respond to those comments in this final rule with comment period) or whether we will be soliciting public comments in this CY 2026 OPPS/ASC final rule with comment period (and responding to those comments in the CY 2027 OPPS/ASC final rule with comment period). 2. April 2025 HCPCS Codes Proposed Rule Comment Solicitation

For the April 2025 update, there were no new CPT codes; however, there were several new Level II HCPCS codes. In the April 2025 ASC quarterly update (Transmittal 13181, dated April 25, 2025, CR 14017), we added one new Level II HCPCS code to the list of covered ancillary services. Table 73 (New Level II HCPCS Codes for ASC Covered Surgical Procedures and Ancillary Services Effective April 1, 2025) of the CY 2026 OPPS/ASC proposed rule (90 FR 33701) displayed the new Level II HCPCS codes that were implemented April 1, 2025. These new codes that were effective April 1, 2025, were assigned to comment indicator

“NP” in Addendum BB to the CY 2026 OPPS/ASC proposed rule to indicate that the codes were assigned to an interim APC assignment and that comments would be accepted on their interim APC assignments. In addition, we note that the entire ASC addenda, which consist of the addenda listed below, are available via the internet on the CMS website, specifically, at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices:

ASC Addendum AA: ASC Covered Surgical Procedures (Including Surgical Procedures for Which Payment is Packaged).

ASC Addendum BB: ASC Covered Ancillary Services Integral to Covered Surgical Procedures (Including Ancillary Services for Which Payment is Packaged).

ASC Addendum DD1: ASC Payment Indicators (PI).

ASC Addendum DD2: ASC Comment Indicators (CI).

ASC Addendum EE: Surgical Procedures to be Excluded from Payment in ASCs.

ASC Addendum FF: ASC Device Offset Percentages.

Addendum O: Long Descriptors for New Category I CPT Codes, Category III CPT Codes, C-Codes, and G-Codes Effective January 1, 2026.

We invited public comments on the proposed interim payment indicators for the new HCPCS codes that were recognized as ASC covered ancillary services in April 2025 through the quarterly update CRs, as listed in Table 123 (New Level II HCPCS Codes for ASC Covered Surgical Procedures and Ancillary Services Effective April 1, 2025). The new codes that were effective April 1, 2025, were assigned to comment indicator “NP” in ASC Addendum BB to the CY 2026 OPPS/ASC proposed rule to indicate that the codes are assigned to interim payment indicators and comments would be accepted on their interim assignments. We proposed to finalize the payment indicators in this final rule with comment period. We did not receive any comments on the proposed ASC payment indicator assignments for the new Level II HCPCS codes implemented in April 2025 and are finalizing the proposed ASC payment indicator assignments for these codes. We note in prior years we included the final ASC payment indicators in the coding tables in the preamble, but because we include the same information in the ASC addenda, we have not included them in Table 123. Therefore, readers are advised to refer to the ASC addenda for the final ASC payment indicators and payment rates for all codes reported under the ASC payment system. The list of ASC payment indicators and definitions used under the ASC payment system can be found in the ASC addenda. We note that the ASC addenda (AA, BB, DD1, DD2, EE, and FF) are available via the internet on the CMS website. BILLING CODE 4120-01-P

[GRAPHIC] [TIFF OMITTED] TR25NO25.177

In the July 2025 ASC quarterly update (Transmittal 13344, Change Request 14101, August 1, 2025), we added several separately payable CPT and Level II HCPCS codes to the list of covered surgical procedures and covered ancillary services. Table 74 (New HCPCS Codes for ASC Covered Surgical Procedures and Ancillary Services Effective July 1, 2025) of the CY 2026 OPPS/ASC proposed rule (90 FR 33702), displayed the new HCPCS codes that are effective July 1, 2025. We invited public comments on the proposed payment indicators for these Level II HCPCS codes, and indicated that the proposed comment indicators, payment indicators, and payment rates for these codes were listed in

Addendum AA and Addendum BB of the proposed rule. These new codes that were effective July 1, 2025, were assigned to comment indicator “NP” in ASC Addendum AA and Addendum BB to the CY 2026 OPPS/ASC proposed rule to indicate that the codes were assigned to interim payment indicators and comments would be accepted on their interim assignments. We further stated that we proposed to finalize the payment indicators in final rule with comment period. We note in prior years we included the final ASC payment indicators in the coding preamble tables, however, because the same information can be found in Addendum AA and Addendum BB, we are no longer including them in Table 124. Therefore, readers are advised to refer to the ASC addenda for the final ASC payment indicators and payment rates for all codes reported under the ASC payment system.

We did not receive any comments on the proposed interim ASC payment indicator assignments for the new CPT and Level II HCPCS codes that were added to the list of covered surgical procedures and ancillary services implemented in July 2025. Therefore, we are finalizing the proposed ASC payment indicator assignments for the codes.

[GRAPHIC] [TIFF OMITTED] TR25NO25.178

[GRAPHIC] [TIFF OMITTED] TR25NO25.179

[GRAPHIC] [TIFF OMITTED] TR25NO25.180

For CY 2026, consistent with our established policy, we proposed in the CY 2026 OPPS/ASC proposed rule (90 FR 33704) that the Level II HCPCS codes that will be effective October 1, 2025, would be flagged with comment indicator “NI” in Addendum BB to this final rule with comment period to indicate that we have assigned the codes an interim ASC payment status for CY 2026. In the October 2025 ASC quarterly update (Transmittal1349, Change Request 14246, dated September 22, 2025), we added several separately payable Level II HCPCS codes to the list of covered surgical procedures and covered ancillary services. Table 125 lists the codes that were effective October 1, 2025. We are inviting public comments on this final rule with comment period on the interim payment indicators, which would be finalized in the CY 2027 OPPS/ASC final rule with comment period. We note these codes will be subject to comment in the CY 2027 OPPS/ASC proposed rule with comment period, which would be finalized in the CY 2027 OPPS/ASC final rule with comment period.

[GRAPHIC] [TIFF OMITTED] TR25NO25.181

BILLING CODE 4120-01-C 5. January 2026 HCPCS Codes a. New Level II HCPCS Codes Final Rule Comment Solicitation

As has been our practice in the past, we incorporate those new Level II HCPCS codes that are effective January 1 in the final rule with comment period, thereby updating the ASC payment system for the calendar year. We note that unlike the CPT codes that are effective January 1 and are included in the OPPS/ASC proposed rules, and except for the G-codes listed in Addendum O to the CY 2026 OPPS/ASC proposed rule, most Level II HCPCS codes are not released until sometime around November to be effective January 1. Because these codes are not available until November, we are unable to include them in the OPPS/ASC proposed rule; however, the codes are flagged with comment indicator “NI” in ASC Addendum AA and Addendum BB to this final rule with comment period to indicate that we are assigning them an interim payment status, which is subject to public comment. Therefore, as we stated in the CY 2025 OPPS/ASC proposed rule, these Level II HCPCS codes that will be effective January 1, 2026 are included in this final rule with comment period and will also be released to the public through the January 2026 ASC Update CR and the CMS HCPCS website. We are inviting public comments in this final rule with comment period on the payment indicator assignments, which would be finalized in the CY 2027 OPPS/ASC final rule with comment period. Similar to the codes effective October 1, 2025, these new Level II HCPCS codes that will be effective January 1, 2026 will be subject to comment in the CY 2027 OPPS/ASC proposed rule, which would be finalized in the CY 2027 OPPS/ ASC final rule with comment period. b. New CY 2026 CPT Codes Proposed Rule Comment Solicitation

For the CY 2026 ASC update, we received the CPT codes that will be effective January 1, 2026, from the AMA in time to be included in the CY 2026 OPPS/ASC proposed rule. The new, revised, and deleted CPT codes can be found in ASC Addendum AA and Addendum BB to the CY 2026 OPPS/

ASC proposed rule, which are available via the internet on the CMS website. We note that the new and revised CPT codes are assigned to comment indicator “NP” in ASC Addendum AA and Addendum BB of the CY 2026 OPPS/ASC proposed rule to indicate that the code is new for the next calendar year, or the code is an existing code with substantial revision to its code descriptor in the next calendar year as compared to the current calendar year with a proposed payment indicator assignment. We stated that we would accept comments and finalize the payment indicators in this final rule with comment period. Further, we remind readers that the CPT code descriptors that appeared in Addendum AA and Addendum BB are short descriptors and do not describe the complete procedure, service, or item described by the CPT code. Therefore, we included the 5-digit placeholder codes and their long descriptors for the new CY 2026 CPT codes in Addendum O to the CY 2026 OPPS/ASC proposed rule (which is available via the internet on the CMS website) so that the public could comment on our proposed payment indicator assignments. The 5-digit placeholder codes were listed in Addendum O to the CY 2026 OPPS/ASC proposed rule, specifically under the column labeled “CY 2026 OPPS/ASC Proposed Rule 5-Digit Placeholder Code.” We also stated that we would include the final CPT code numbers in this CY 2026 OPPS/ASC final rule with comment period.

We did not receive any comments on the proposed ASC payment indicators for the new CPT codes effective January 1, 2026, so we are finalizing these codes as proposed.

Finally, in Table 126, we summarize our process for updating codes through our ASC quarterly update CRs, seeking public comments, and finalizing the treatment of these new codes under the ASC payment system. [GRAPHIC] [TIFF OMITTED] TR25NO25.182

6. ASC Payment and Comment Indicators a. Background

In addition to the payment indicators that we introduced in the August 2, 2007 ASC final rule with comment period, we created final comment indicators for the ASC payment system in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66855). We created Addendum DD1 to define ASC payment indicators that we use in Addenda AA and BB to provide payment information regarding covered surgical procedures and covered ancillary services, respectively, under the revised ASC payment system. The ASC payment indicators in Addendum DD1 are intended to capture policy-relevant characteristics of HCPCS codes that may receive packaged or separate payment in ASCs, such as whether they were on the ASC CPL prior to CY 2008; payment designation, such as device-intensive or office-based, and the corresponding ASC payment methodology; and their classification as separately payable ancillary services, including radiology services, brachytherapy sources, OPPS pass-through devices, corneal tissue acquisition services, drugs or biologicals, NTIOLs, or qualifying non-opioid devices.

We also created Addendum DD2 that lists the ASC comment indicators. The ASC comment indicators included in Addenda AA and BB to the proposed rules and final rules with comment period serve to identify, for the revised ASC payment system, the status of a specific HCPCS code and its payment indicator with respect to the timeframe when comments will be accepted. The comment indicator “NI” is used in the OPPS/ASC final rule with comment period to indicate new codes for the next calendar year for which the interim payment indicator assigned is subject to comment. The comment indicator “NI” also is assigned to existing codes with substantial revisions to their descriptors such that we consider them to be describing new services, and the interim payment indicator assigned is subject to comment, as discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60622).

The comment indicator “NP” is used in the OPPS/ASC proposed rule to indicate new codes for the next calendar year for which the proposed payment indicator assigned is subject to comment. The comment indicator “NP” also is assigned to existing codes with substantial revisions to their descriptors, such that we consider them to be describing new services, and the

proposed payment indicator assigned is subject to comment, as discussed in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70497).

The “CH” comment indicator is used in Addenda AA and BB to the proposed rule (these addenda are available via the internet on the CMS website) to indicate that the payment indicator assignment has changed for an active HCPCS code in the current year and the next calendar year, for example, if an active HCPCS code is newly recognized as payable in ASCs or an active HCPCS code is discontinued at the end of the current calendar year. The “CH” comment indicators that are published in the final rule are provided to alert readers that a change has been made from one calendar year to the next, but do not indicate that the change is subject to comment.

In the CY 2021 OPPS/ASC final rule with comment period, we finalized the addition of ASC payment indicator “K5”--Items, Codes, and Services for which pricing information and claims data are not available. No payment made--to ASC Addendum DD1 (which is available via the internet on the CMS website) to indicate those services and procedures that CMS anticipates will become payable when claims data or payment information becomes available.

In CY 2024 OPPS/ASC final rule with comment period, we finalized the addition of two ASC payment indicators, “D1”--“Ancillary dental service/item; no separate payment made” and “D2”--“Non office-based dental procedure added in CY 2024 or later”, for new dental codes for CY 2024 and subsequent calendar years to indicate potentially payable dental services and procedures in the ASC setting (88 FR 81907). We added these two codes to Addendum DD1 (which is available via the internet on the CMS website).

In CY 2025 OPPS/ASC final rule with comment period, we finalized the modification of the descriptor of ASC payment indicator “L6” to “Special payment; New Technology Intraocular Lens (NTIOL) or qualifying non-opioid devices”, to account for non-opioid devices paid for under the ASC payment system pursuant to section 4135 of the Consolidated Appropriations Act (CAA), 2023 (89 FR 94317). We added this code to Addendum DD1 (which is available via the internet on the CMS website). b. Final ASC Payment and Comment Indicators for CY 2026

For CY 2026, we proposed new and revised Category I and III CPT codes as well as new and revised Level II HCPCS codes. Proposed Category I and III CPT codes that are new and revised for CY 2026 and any new and existing Level II HCPCS codes with substantial revisions to the code descriptors for CY 2026, compared to the CY 2025 descriptors, are included in ASC Addenda AA and BB to the CY 2026 OPPS/ASC proposed rule and labeled with comment indicator “NP” to indicate that these CPT and Level II HCPCS codes were open for comment as part of the CY 2026 OPPS/ASC proposed rule.

As discussed in section III. of the CY 2026 OPPS/ASC proposed rule, we proposed to create APC groups to pay separately for certain skin substitutes under the OPPS and, as discussed in section XIII.D. of the CY 2026 OPPS/ASC proposed rule, we also proposed to pay separately for skin substitute supplies in the ASC payment system and add such supplies to the ancillary items and services list for CY 2026.

Under the ASC payment system, skin substitute products are currently packaged and assigned an ASC payment indicator of “N1” (Packaged service/item; no separate payment made). We do not believe there is an existing payment indicator available that would adequately describe these supplies and provide the correct separate payment under the ASC payment system. Under this new policy, payment under the ASC payment system for separately payable skin substitute products would be based on the OPPS conversion factor, not on the ASC conversion factor. Additionally, payment for these skin substitute products would not be subject to the ASC wage index. Therefore, for CY 2026 and subsequent years, we proposed to create a new ASC payment indicator “S2”--(Skin substitute supply group; paid separately when provided integral to a surgical procedure on ASC list; payment based on OPPS rate)--to Addendum DD1 to this final rule with comment period to describe skin substitute products paid separately in an ASC. This “S2” payment indicator would indicate a separately payable ancillary skin substitute supply when provided integral to a separately payable ASC covered surgical procedure.

We did not receive public comments on our proposal to create a new “S2” payment indicator. Therefore, we are finalizing our proposal to indicate a separately payable ancillary skin substitute supply when provided integral to a separately payable ASC covered surgical procedure beginning CY 2026. We refer readers to Addenda DD1 and DD2 of this final rule with comment period (these addenda are available via the internet on the CMS website) for the complete list of ASC payment and comment indicators finalized for the CY 2026 update.