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

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the conversion factor used to determine the payment rates under the OPPS on an annual basis by applying the OPD fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase factor is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges of the Act (or an amount that is computed and applied with respect to covered OPD services). In the FY 2026 IPPS/Long Term Care Hospital (LTCH) proposed rule (90 FR 18266), consistent with current law, based on IHS Global, Inc.'s (IGI's) fourth quarter 2024 forecast, the proposed FY 2026 IPPS market basket percentage increase was 3.2 percent. We noted that under our regular process for the CY 2026 OPPS/ASC final rule with comment period, we would use the market basket update for the FY 2026 IPPS/LTCH PPS final rule. If that forecast is different than the IPPS market basket percentage increase used for the CY 2026 OPPS/ASC proposed rule, the CY 2026 OPPS/ASC final rule with comment period OPD fee schedule increase factor would reflect that updated forecast of the market basket percentage increase.

For CY 2026, we proposed to use the estimate of the hospital inpatient market basket percentage increase of 3.2 percent as one component to calculate the OPD fee schedule increase factor.

Comment: One commenter supported the CY 2026 update factor.

Response: We thank the supporter for the support.

Comment: Several commenters expressed concerns that the proposed CY 2026 market basket update of 2.4 percent, through which the majority of hospitals would only receive a 0.06 percent net increase, does not adequately keep up with the increased costs of delivering care across all settings.

One commenter suggested that CMS expand the data set to ensure the use of accurate, timely data that reflect real labor costs. Specifically, they requested CMS apply its exceptions and adjustments authority to make a one-time retrospective adjustment of 10 to15 percent to the market basket to account for the update hospitals should have received in 2022 when accounting for inflation. The commenter suggested CMS establish a threshold such that if the payment differential between what was provided and actual costs is greater than 1.5 percentage points, there is a retroactive adjustment to payments above the threshold. The commenter also suggested CMS recalibrate the market basket more frequently, at least once every 3 years to ensure the market basket reflects the appropriate mix of services.

Another commenter suggested that the proposed increase is insufficient if the 340B repayment acceleration and volume control policy for medication administration services are finalized. The commenter also stated that CMS should reconsider the data source for workforce costs because the healthcare industry has shifted since the pandemic. The commenter stated that workers have demanded higher salaries to keep up with economic changes and the ECI survey of hospital employment that CMS employs does not account for contracted or contingent workers.

Another commenter expressed concern that the update is insufficient and unsustainable for rural hospitals. The commenter stated 196 hospitals have closed or ceased to provide inpatient services since 2010, and there are 432 rural hospitals vulnerable to closure. The commenter stated the Consumer Price Index (CPI) was 4.2 percent as of June 2025 and that the Medicare reimbursement continues to fall behind the actual cost of providing care to beneficiaries. The commenter stated CMS' projections for updating payment rates are lower than actual inflation due to the use of historical data. The commenter stated CMS must explore how it can accurately pay rural hospitals by accounting for inflation and historical underpayment.

Commenters stated that since the COVID-19 PHE, IGI has shown a consistent trend of under-forecasting the market basket growth and expressed concern this may indicate a more systematic issue with IGI's forecasting. Several commenters, including many associations, urged CMS to use its special exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to implement a retrospective one-time adjustment for CY 2026 to account for the underestimation of the market basket updates over the last several years. Commenters recommended that CMS implement various one-time adjustments of 4.3 percent to account for underpayments in 1 or more years between CY 2021 and CY 2025 as well as for forecasted underpayments for CY 2026. The commenters stated the underestimation is, in large part, because the market basket is a time-lagged estimate that cannot fully account for unexpected changes that occur, such as historic inflation and increased labor and supply costs.

Response: We acknowledge commenters' concerns on the proposed CY 2026 market basket of 2.4 percent, including the challenging financial landscape in which rural hospitals operate. According to section 1833(t)(3)(C)(iv) of the Act, the OPD fee schedule increase factor for a year must be equal to the IPPS market basket percentage increase factor applicable under section 1886(b)(3)(B)(iii) of the Act to hospital discharges in the fiscal year ending in such year. Therefore, we are unable to adopt a final OPD fee schedule increase factor different than the IPPS market basket percentage increase factor finalized in the FY 2026 IPPS/LTCH PPS final rule. We refer commenters to the FY 2026 IPPS/LTCH PPS final rule for responses regarding the market basket issues commenters raised (90 FR 36900 to 36903). 2. Productivity Adjustment

Section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year

moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period) (the “productivity adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the productivity adjustment. The U.S. Department of Labor's Bureau of Labor Statistics (BLS) publishes the official measures of private nonfarm business productivity for the U.S. economy. We note that previously the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private nonfarm business multifactor productivity. Beginning with the November 18, 2021, release of productivity data, BLS replaced the term multifactor productivity (MFP) with total factor productivity (TFP). BLS noted that this is a change in terminology only and will not affect the data or methodology. As a result of the BLS name change, the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as private nonfarm business total factor productivity. However, as mentioned, the data and methods are unchanged. Please see www.bls.gov for the BLS historical published TFP data. A complete description of IGI's TFP projection methodology is available on the CMS website at https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. In addition, we note that beginning with the FY 2022 IPPS/LTCH PPS final rule, we refer to this adjustment as the productivity adjustment rather than the MFP adjustment to more closely track the statutory language in section 1886(b)(3)(B)(xi)(II) of the Act. We note that the adjustment continues to rely on the same underlying data and methodology. In the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18266), the proposed productivity adjustment for FY 2026 was 0.8 percentage point.

Therefore, we proposed that the productivity adjustment for the CY 2026 OPPS/ASC proposed rule would be 0.8 percentage point. We also proposed that if more recent data subsequently become available after the publication of the CY 2026 OPPS/ASC proposed rule (for example, a more recent estimate of the market basket percentage increase and/or the productivity adjustment), we would use such data, if appropriate, to determine the CY 2026 hospital inpatient market basket update and the productivity adjustment for the final rule with comment period, which are components in calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 percent for a year and may result in OPPS payment rates being less than rates for the preceding year. As described in further detail below, we proposed for CY 2026 an OPD fee schedule increase factor of 2.4 percent for the CY 2026 OPPS/ASC proposed rule (which is the proposed estimate of the hospital inpatient market basket percentage increase of 3.2 percent, less the proposed 0.8 percentage point productivity adjustment).

Comment: Commenters requested that CMS eliminate or waive the productivity adjustment for CY 2026 and going forward using CMS' special exceptions and adjustments authority under section 1886(b)(3)(B)(xi) of the Act, which would justify special circumstances. The commenters stated the COVID-19 pandemic years distorted productivity measurements and the application of the full productivity adjustment penalizes hospitals for costs beyond their control. The commenters requested the waiver due to strong concerns about the productivity adjustment cuts given the uncertainty which hospitals and healthcare systems are currently operating.

Commenters expressed concerns that the productivity adjustment, which reflects the private nonfarm business total factor productivity, are not achieved by hospitals and the health care field. Commenters stated the TFP, or productivity adjustment does not account for non- profit or government business which account for 60 percent of hospitals and health systems. The commenter requested we provide transparency into the data on the 10-year moving average periods in calculating the productivity adjustment. The commenter is concerned that the productivity adjustment was artificially and inappropriately increased.

Response: While we understand the commenters' concerns, section 1833(t)(3)(F)(i) of the Act requires that after determining the OPD fee schedule increase factor under subparagraph (C)(iv), the Secretary shall reduce such increase factor by the productivity adjustment described in section 1886(b)(3)(B)(xi) of the Act. As required by statute, the FY 2026 productivity adjustment is derived based on the 10-year moving average growth in economy-wide productivity for the period ending FY 2026.

We thank the commenters for their comments. After consideration of the comments received and consistent with our proposal, we are finalizing an OPD fee schedule increase factor with modification of 2.4 percent for CY 2026, which consists of the IPPS market basket increase factor of 3.2 percent less a 0.8 percentage point productivity adjustment. 3. Other Conversion Factor Adjustments

To set the OPPS conversion factor for 2026, we proposed to increase the CY 2025 conversion factor of $89.169 by 2.4 percent. In accordance with section 1833(t)(9)(B) of the Act, we proposed to further adjust the conversion factor for CY 2026 to ensure that any revisions made to the wage index and rural adjustment are made on a budget neutral basis. We proposed to apply an overall budget neutrality factor of 1.0116 for wage index changes by comparing proposed total estimated payments from our simulation model using the proposed FY 2026 IPPS wage indexes to those payments using the CY 2025 OPPS wage indexes. We further proposed to calculate an additional budget neutrality factor of 0.9955 to account for our proposed policy to cap wage index reductions for hospitals at 5 percent on an annual basis and the CY 2026 proposed transitional exception for low wage index hospitals.

For CY 2026, we proposed to maintain the current rural adjustment policy, as discussed in section II.E. of this final rule with comment period. Therefore, the proposed budget neutrality factor for the rural adjustment was 1.0000.

We proposed to calculate a CY 2026 budget neutrality adjustment factor for the cancer hospital payment adjustment. We previously finalized transitioning from the target PCR of 0.89 for CYs 2020 through 2023 (which included the 1.0 percentage point reduction as required by section 16002(b) of the 21st Century Cures Act) and incrementally reducing the target PCR by an additional 1.0 percentage point for each calendar year, beginning with CY 2024, until the target PCR equals the PCR of non-cancer hospitals calculated using the most recent data minus 1.0 percentage point as required by section 16002(b) of the 21st Century Cures Act. Based on the most recent data available for this final rule with comment period, the target PCR now equals the PCR of non-cancer

hospitals. We proposed a CY 2026 target PCR equal to 0.87 for the cancer hospital payment adjustment, which includes the 1.0 percentage point reduction as required by section 16002(b) of the 21st Century Cures Act. We note that this proposed target PCR is the same as the final target PCR established in the CY 2025 OPPS (89 FR 93979). Therefore, we proposed to apply a budget neutrality adjustment factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment.

For the CY 2026 OPPS/ASC proposed rule, we estimated that proposed pass-through spending for drugs, biologicals, and devices for CY 2026 will equal approximately $587 million, which represents 0.59 percent of total projected CY 2026 OPPS spending. Therefore, we stated that the proposed conversion factor would be adjusted by the difference between the 0.37 percent estimate of pass-through spending for CY 2025 and the 0.59 percent estimate of proposed pass-through spending for CY 2026, resulting in a proposed decrease to the conversion factor for CY 2026 of 0.22 percentage point.

We proposed that estimated payments for outliers would be 1.0 percent of total OPPS payments for CY 2026. We estimate for the CY 2026 OPPS/ASC proposed rule that outlier payments would be approximately 0.92 percent of total OPPS payments in CY 2025; the 1.00 percent for proposed outlier payments in CY 2026 would constitute a 0.08 percentage point increase in payment in CY 2026 relative to CY 2025.

For CY 2026, we proposed to use a conversion factor of $91.747 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs; that is, the proposed OPD fee schedule increase factor of 1.024 (2.4 percent for CY 2026), the required proposed wage index budget neutrality adjustment of approximately 1.0116, the proposed 5 percent annual cap for individual hospital wage index reductions adjustment and the proposed transitional exception of approximately 0.9955, the proposed cancer hospital payment adjustment of 1.0000, and the proposed adjustment factor of 0.9978 (a decrease of 0.22 percentage point) for the difference in pass-through spending, and a 0.08 percentage point increase in projected OPPS spending for the projected increase in outlier payments, which resulted in a proposed conversion factor for CY 2026 of $91.747.

For CY 2026, we also proposed that hospitals that fail to meet the reporting requirements of the Hospital OQR Program would continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase factor. For hospitals that fail to meet the requirements of the Hospital OQR Program, we proposed to make all other adjustments discussed above and apply an adjustment factor of 0.9805 to the proposed CY 2026 conversion factor of $91.747. We proposed that the hospitals that fail to meet the requirements of the Hospital OQR Program will use a reduced OPD fee schedule update factor of 0.4 percent (that is, the proposed OPD fee schedule increase factor of 2.4 percent further reduced by 2.0 percentage points).

For CY 2026, we proposed to reduce payments for non-drug items and services for hospitals for whom the annual reduction to payment amounts under Sec. [thinsp]419.32(b)(1)(iv)(B)(12) applies with a 2 percentage point reduction to the OPD fee schedule increase factor, explained in more detail in section V.B.7. of this final rule with comment period. This would result in a proposed reduced conversion factor for CY 2026 of approximately $89.958 for this group of hospitals. The calculations we performed to determine the CY 2026 proposed conversion factor are shown in Table 8.

Comment: Commenters expressed concerns with the proposed 340B accelerated offset and its reduction on the CY 2026 proposed rate increase.

Response: We acknowledge commenters' concerns on the proposed 340B accelerated offset. For a discussion of the CY 2026 340B remedy offset, we refer readers to section V.B.7 of this final rule with comment period.

For this CY 2026 OPPS/ASC final rule with comment period, based on more recent data available, the OPD fee schedule increase factor for the CY 2026 OPPS is 2.6 percent (which reflects the 3.3 percent final estimate of the hospital inpatient market basket percentage increase with a--0.7 percentage point productivity adjustment). For CY 2026, we are using a conversion factor of $91.415 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs; that is, the OPD fee schedule increase factor of 2.6 percent for CY 2026, the required wage index budget neutrality adjustment of 0.9990, the 5 percent annual cap for individual hospital wage index reductions of 0.9995, the cancer hospital payment adjustment of 1.0000, and the adjustment of 0.07 (or 0.37 less 0.30) percentage point of projected OPPS spending for the difference in pass-through spending that results in a conversion factor for CY 2026 of $91.415. We are also finalizing a reduced conversion factor of $89.632 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements (a difference of -1.783 in the conversion factor relative to hospitals that met the requirements). BILLING CODE 4120-01-P

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Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is called the OPPS labor-related share. The budget neutrality calculation methodology is discussed in section II.A.5. of this final rule with comment period.

The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that, for all hospitals, approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68553). We proposed to continue this policy for the CY 2026 OPPS/ASC final rule with comment period. We refer readers to section II.C. of this final rule with comment period for a description and an example of how the wage index for a particular hospital is used to determine payment for the hospital.

We did not receive any public comments on our proposed labor- related share, and we are finalizing our proposal without modification.

As discussed in the claims accounting narrative included with the supporting documentation for this final rule with comment period (which is available via the internet on the CMS website (https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices)), for estimating APC costs, we would standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2026 pre-reclassified wage index that we use under the IPPS to standardize costs. This standardization process removes the effects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and copayment amount.

Under Sec. Sec. 419.41(c)(1) and 419.43(c) (published in the OPPS April 7, 2000, final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS post-reclassified wage index as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Therefore, the wage index that applies to a particular acute care, short-stay hospital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998, OPPS/ASC proposed rule (63 FR 47576), we believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained several provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). Section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines a frontier State and amended section 1833(t) of the Act to add paragraph (19), which requires a frontier State wage index floor of 1.00 in certain cases, and states that the frontier State floor shall not be applied in a budget neutral manner. We codified these requirements at Sec. [thinsp]419.43(c)(2) and (3) of our regulations. For CY 2026, we proposed to implement this provision in the same manner as we have since CY 2011. Under this policy, the frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, the rural floor, and rural floor budget neutrality) is less than 1.00. Because the HOPD receives a wage index based on the geographic location of the specific inpatient hospital with which it is associated, the frontier State wage index adjustment applicable for the inpatient hospital also would apply for any associated HOPD. We refer readers to the FY 2011 through FY 2025 IPPS/LTCH PPS final rules for discussions regarding this provision, including our methodology for identifying which areas meet the definition of “frontier States” as provided for in section 1886(d)(3)(E)(iii)(II) of the Act: for FY 2011, 75 FR 50160 through 50161; for FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR 53369 and 53370; for FY 2014, 78 FR 50590 and 50591; for FY 2015, 79 FR 49971; for FY 2016, 80 FR 49498; for FY 2017, 81 FR 56922; for FY 2018, 82 FR 38142; for FY 2019, 83 FR 41380; for FY 2020, 84 FR 42312; for FY 2021, 85 FR 58765; for FY 2022, 86 FR 45178; FY 2023, 87 FR 49006; FY 2024, 88 FR 58977; and for FY 2025, 89 FR 69300.

In addition to the changes required by the Affordable Care Act, we note that the proposed FY 2026 IPPS wage indexes continue to reflect a number of adjustments implemented in past years, including, but not limited to, reclassification of hospitals to different geographic areas, the rural floor provisions, the imputed floor wage index adjustment in all-urban States, an adjustment for occupational mix, an adjustment to the wage index based on commuting patterns of employees (the out-migration adjustment), and the permanent 5 percent cap on any decrease to a hospital's wage index from its wage index in a prior FY. Beginning with FY 2024, we include hospitals with Sec. [thinsp]412.103 reclassification along with geographically rural hospitals in all rural wage index calculations, and to exclude “dual reclass” hospitals (hospitals with simultaneous Sec. [thinsp]412.103 and Medicare Geographic Classification Review Board (MGCRB) reclassifications) implicated by the hold harmless provision at section

1886(d)(8)(C)(ii) of the Act (88 FR 58971 through 58973). We refer readers to the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18217 through 18236) for a detailed discussion of all proposed changes to the FY 2026 IPPS wage indexes.

Comment: MedPAC expressed support for CMS' annual process to update the OPPS wage index with newer wage data and Office of Management and Budget delineations. However, MedPAC also expressed its concerns with flaws in the wage index system. MedPAC emphasized that, in order to improve the accuracy and fairness of Medicare's wage index systems for IPPS and OPPS hospitals and other providers, Medicare needs wage indexes that are less manipulable, that more accurately and precisely reflect geographic differences in market-wide labor costs, and that limit how much wage index values can differ among providers that are competing for the same pool of labor. To address these concerns, MedPAC stated that in its June 2023 report to Congress, it recommended that the Congress repeal the existing Medicare wage index statutes, including current exceptions, and require the Secretary to phase in new wage index systems for hospitals and other types of providers that (1) use all-employer, occupation-level wage data with different occupation weights for the wage index of each provider type; (2) reflect local area level differences in wages between and within metropolitan statistical areas and statewide rural areas; and (3) smooth wage index differences across adjacent local areas.

Response: We appreciate MedPAC's concerns, but as MedPAC acknowledges in its comment, the Congress would need to change current law to implement MedPAC's suggestions.

Comment: One commenter expressed support for CMS' policy to treat urban hospitals re-designated as rural under Sec. 412.103 the same as geographically rural hospitals for the wage index calculation. The commenter opined that treating urban hospitals re-designated as rural under Sec. 412.103 the same as geographically rural hospitals for the calculation of the rural wage index and rural floor is an appropriate and fair implementation of the statute.

Response: We thank the commenter for their support. We note that in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021), we finalized a permanent approach to smooth year-to-year decreases in hospitals' wage indexes. Specifically, for FY 2023 and subsequent years, we apply a 5 percent cap on any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline. That is, a hospital's wage index for FY 2026 would not be less than 95 percent of its final wage index for FY 2025. Except for newly opened hospitals, we apply the cap for a fiscal year using the final wage index applicable to the hospital on the last day of the prior fiscal year. A newly opened hospital would be paid the wage index for the area in which it is geographically located for its first full or partial fiscal year (subject to any reclassification), and it would not receive a cap for that first year, because it would not have been assigned a wage index in the prior year (in accordance with 42 CFR 419.41(c)(1) and 419.43(c), as noted previously).

Comment: Several commenters, including MedPAC, supported the policy to cap wage index decreases. MedPAC urged CMS to apply a cap to wage index increases as well. Several commenters urged CMS to exclude the wage index cap policy from budget neutrality.

Response: We thank the commenters for their support. We appreciate MedPAC's suggestion that the cap on wage index changes should also be applied to increases in the wage index. However, as we stated in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49021), one purpose of the wage index policy is to help mitigate the significant negative impacts of certain wage index changes. That is, we cap decreases because we believe that a hospital would be able to more effectively budget and plan when there is predictability about its expected minimum level of OPPS payments in the upcoming fiscal year. We do not have a policy to limit wage index increases because we do not believe such a policy is needed to enable hospitals to more effectively budget and plan their operations. Therefore, we believe it is appropriate for hospitals that experience an increase in their wage index value to receive that wage index value. With respect to excluding the wage index cap policy from budget neutrality, under the OPPS, section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner. This statutory requirement is inconsistent with the commenters' request to exclude the wage index cap policy from budget neutrality.

Consistent with the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18233), we proposed to discontinue for CY 2026 and subsequent years the low wage index hospital policy under the OPPS. Under the low wage index hospital policy that we adopted for the OPPS (84 FR 61186 through 61188), we increased the wage index for hospitals with a wage index value below the 25th percentile wage index value for a calendar year by half the difference between the otherwise applicable final wage index value for a year for that hospital and the 25th percentile wage index value for that year across all hospitals. We removed the low wage index hospital policy from the IPPS wage index calculation for FY 2025 after considering the Court of Appeals for the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, 108 F.4th 882 (D.C. Cir. 2024). On July 23, 2024, the court held in Bridgeport Hosp. v. Becerra that the Secretary lacked authority under section 1886(d)(3)(E) of the Act or under the “adjustments” language of section 1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy for FY 2020 for the IPPS, and that the policy for FY 2020 and related budget neutrality adjustment in the IPPS must be vacated. After considering the court's decision, in the interim final action with comment period (IFC) titled “Medicare Program; Changes to the Fiscal Year 2025 Hospital Inpatient Prospective Payment System (IPPS) Rates Due to Court Decision” (referred to herein as the FY 2025 IFC) (89 FR 80405 through 80421), we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025 and also removed the low wage index budget neutrality factor from the FY 2025 standardized amounts.

In the FY 2026 IPPS/LTCH PPS proposed rule, after considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, we proposed to discontinue the low wage index hospital policy for FY 2026 and subsequent fiscal years. We refer the reader to the FY 2025 IFC (89 FR 80405 through 80421) and FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18233 through 18236) for a detailed discussion regarding the removal of the low wage index hospital policy from the IPPS for FYs 2025 and 2026.

As discussed previously, from the establishment of the OPPS in 2000 through 2024, we adopted the IPPS wage index on a calendar year basis in the OPPS. From FY 2020 to FY 2024, the IPPS wage index included the low wage index hospital policy and we correspondingly adopted the low wage index hospital policy under the OPPS for CY 2020 to CY 2024. However, when the Bridgeport decision was issued in July 2024, the OPPS did not remove the

low wage index hospital policy from the calculation of the CY 2025 wage index. As discussed in the CY 2025 OPPS/ASC final rule with comment period, this decision to continue the low wage index hospital policy under the OPPS for CY 2025 (and thus to diverge from the IPPS wage index for FY 2025) was due principally to the unique circumstances presented by the timing of the court decision and subsequent IFC and the statutory authority that CMS relied upon to implement the low wage index hospital policy under the OPPS was different than the statutory authority relied upon for the policy under the IPPS. We took this approach for the CY 2025 OPPS given the unusual circumstances wherein an appellate court ruled that CMS lacked authority under the IPPS statute for a policy under the FY 2020 IPPS wage index that the OPPS/ ASC proposed rule had already proposed to include in the OPPS wage index. Under these circumstances, we concluded that continuing the low wage index hospital policy for CY 2025 would avoid unexpected and arguably unfair payment consequences for hospitals that were not plaintiffs in Bridgeport. Additionally, we believed that the same reasons underlying adoption of the IFC policies for the FY 2025 IPPS wage index weighed against incorporating those policies for purposes of the CY 2025 OPPS wage index. Specifically, we noted in the IFC that the intention of the policies implemented therein was to “promote certainty regarding . . . payments” and “provide for payment stability and promote predictability,” in light of the court's decision in Bridgeport (89 FR 80408) and we determined that those interests would be better served by finalizing the OPPS wage index methodology as proposed, including the low wage index hospital policy. Based on these considerations, we continued the low wage index hospital policy under the OPPS for CY 2025 as proposed but indicated that we would explore options for realigning the IPPS and OPPS wage index values through future rulemaking. We refer readers to the CY 2025 OPPS/ ASC final rule with comment period for a detailed discussion regarding our retention of the low wage index hospital policy under the OPPS for CY 2025 (89 FR 93975 through 93976).

Given the proposal to discontinue the low wage index hospital policy under the IPPS in the FY 2026 IPPS/LTCH PPS proposed rule and the absence of the timing issues which compelled us to continue the low wage index hospital policy under the OPPS for CY 2025, we stated in the CY 2026 OPPS/ASC proposed rule that we think it is now appropriate to return to our longstanding policy of using the IPPS wage index as the source of an adjustment factor for the OPPS. Consequently, to effectuate full realignment of the IPPS and OPPS wage index values in CY 2026, we proposed to eliminate the low wage index hospital policy under the OPPS and use the IPPS wage index in CY 2026 and subsequent years.

To effectuate full realignment of the IPPS and OPPS wage index values in CY 2026, we proposed that the 5 percent cap that will apply to the CY 2026 OPPS wage index will be based off the IPPS wage index for FY 2025 rather than the OPPS wage index for CY 2025. We noted that because the CY 2025 OPPS wage index was different than the FY 2025 IPPS wage index (due to the continuation of the low wage index hospital policy under the OPPS), using the FY 2026 IPPS wage index for the CY 2026 OPPS wage index would result in decreases greater than 5 percent to some hospitals' wage indexes under the OPPS. Therefore, under our proposal the 5 percent cap on wage index decreases in the CY 2026 OPPS would apply in a similar manner to years prior to the CY 2025 OPPS, in which IPPS hospitals would receive the same wage index with the cap on wage index decreases as they would under the FY IPPS, and non-IPPS hospitals and CMHCs would receive a similar corresponding wage index with the cap on wage index decreases policy under the broader wage index adoption.

Comment: Most commenters supported our proposal to effectuate full realignment of the IPPS and OPPS wage index values in CY 2026 by eliminating the low wage index hospital policy under the OPPS and using the IPPS wage index in CY 2026 and subsequent years.

Response: We thank commenters for their support.

Comment: One commenter expressed concern about our proposal to eliminate the low wage index hospital policy, stating that eliminating it without a permanent, equitable alternative will disproportionately harm hospitals that serve vulnerable and underserved populations. Another commenter urged CMS to reconsider its approach to the area wage index following the removal of the low wage index policy and to take corrective action to address its inequities, particularly for rural States.

Response: We understand the commenters' concerns that the rationale for implementing the low wage index hospital policy remains. However, we believe it is important to return the IPPS and OPPS wage index values to their historical and longstanding alignment. As initially explained in the September 8, 1998, OPPS/ASC proposed rule (63 FR 47576), we believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall.

After consideration of the public comments we received, we are finalizing our proposal without modification to discontinue the low wage index hospital policy under the OPPS and use the FY 2026 IPPS post-reclassified wage index for urban and rural areas as finalized in the FY 2026 IPPS final rule as the wage index for the OPPS. We are also finalizing our proposal without modification that the 5 percent cap that will apply to the CY 2026 OPPS wage index and will be based off the IPPS wage index for FY 2025 rather than the OPPS wage index for CY 2025.

We note that in the FY 2026 IPPS proposed rule (90 FR 18233 through 18235) we proposed, using our authority under section 1886(d)(5)(I)(i) of the Act, to adopt a narrow transitional exception to the calculation of FY 2026 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy. As indicated in that rule, we proposed this temporary payment exception “to mitigate short-term instability and payment fluctuations that can negatively impact hospitals consistent with principles of certainty and predictability under prospective payment systems.” To address these same concerns under the OPPS, we correspondingly proposed a transitional payment exception for CY 2026 under the OPPS using our equitable adjustment authority under section 1833(t)(2)(E) of the Act. This authority allows the Secretary to establish, in a budget neutral manner, adjustments as determined to be necessary to ensure equitable payments.

The transitional exception policy we proposed would apply to hospitals that benefited from the CY 2024 low wage index hospital policy. For those hospitals, we proposed to compare the hospital's proposed CY 2026 wage index to the hospital's CY 2024 wage index. If the hospital is significantly impacted by the discontinuation of the low wage index hospital policy, meaning the hospital's proposed CY 2026 wage index is decreasing by more than 9.75 percent[thinsp]from the hospital's CY 2024 wage index, then the transitional payment exception for CY 2026 for that

hospital would be equal to the additional CY 2026 amount the hospital would be paid under the OPPS if its CY 2026 wage index were equal to 90.25 percent[thinsp]of its CY 2024 wage index. This proposed transitional payment exception would be applied after the application of the 5-percent cap described at 42 CFR 412.64(h)(7). We proposed to make this policy budget neutral under the OPPS through the second wage index budget neutrality adjustment applied to the OPPS conversion factor (which currently includes the 5 percent hold harmless cap policy).

Comment: Multiple commenters supported CMS' proposal to establish a transitional payment exception for CY 2026. Commenters also requested that the proposed transitional payment exception be applied in a non- budget neutral manner.

Response: We appreciate the commenters' support of our policy to establish a transitional payment exception for CY 2026. For the OPPS, section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner. Commenters' request to exclude the proposed transitional payment exception from budget neutrality is inconsistent with the budget neutral requirement under 1833(t)(2)(D) of the Act.

Comment: One commenter stated that as proposed, the transitional payment exception would cause disproportionate harm to rural, safety- net, and OPPS hospitals that cannot be reclassified. To avoid this outcome, the commenter recommended that CMS: (1) anchor the 5 percent cap to the CY 2025 OPPS wage-index baseline, not the FY 2025 IPPS baseline; (2) broaden the transitional exception to >5 percent decline, not >9.75 percent, and set the floor at 95 percent of CY 2024, not 90.25 percent; and (3) retain an OPPS low-wage policy or equivalent hold-harmless policies until alignment can occur without producing greater than 5 percent decreases from baseline.

Response: We appreciate the alternative methods suggested by the commenter to help mitigate the effect on hospitals of eliminating the low wage index hospitals policy. We note, however, that we had described in the CY 2025 OPPS/ASC final rule with comment period our intention to realign the wage index and by adopting into the OPPS transitional payment exception the same percentages and methodologies used by the IPPS transitional payment exception, we can fully align the wage index across both systems in CY 2026 rather than having discrepancies and inconsistencies that continue into future years based on ongoing transition policies.

After consideration of the public comments we received, we are finalizing our proposal without modification to adopt a transitional payment exception for CY 2026 under the OPPS using our equitable adjustment authority under section 1833(t)(2)(E) of the Act.

Core Based Statistical Areas (CBSAs) are made up of one or more constituent counties. Each CBSA and constituent county has its own unique identifying codes. The FY 2018 IPPS/LTCH PPS final rule (82 FR 38130) discussed the two different lists of codes to identify counties: Social Security Administration (SSA) codes and Federal Information Processing Standard (FIPS) codes. Historically, CMS listed and used SSA and FIPS county codes to identify and crosswalk counties to CBSA codes for purposes of the IPPS and OPPS wage indexes. However, the SSA county codes are no longer being maintained and updated, although the FIPS codes continue to be maintained by the U.S. Census Bureau. The Census Bureau's most current statistical area information is derived from ongoing census data received since 2010; the most recent data are from 2015. The Census Bureau maintains a complete list of changes to counties or county equivalent entities on the website at https://www.census.gov/programs-surveys/geography/technical-documentation/county-changes.html. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38130), for purposes of crosswalking counties to CBSAs for the IPPS wage index, we finalized our proposal to discontinue the use of the SSA county codes and begin using only the FIPS county codes. Similarly, for the purposes of crosswalking counties to CBSAs for the OPPS wage index, in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59260), we finalized our proposal to discontinue the use of SSA county codes and begin using only the FIPS county codes. For CY 2026, under the OPPS, we are continuing to use only the FIPS county codes for purposes of crosswalking counties to CBSAs.

We proposed to use the FY 2026 IPPS post-reclassified wage index for urban and rural areas as the wage index for the OPPS to determine the wage adjustments for both the OPPS payment rate and the copayment rate for CY 2026. Therefore, any policies and adjustments that are finalized for the FY 2026 IPPS post-reclassified wage index would be reflected in the final CY 2026 OPPS wage index beginning on January 1, 2026, if appropriate. We refer readers to the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18217 through 18236) and the proposed FY 2026 hospital wage index files posted on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2026-ipps-proposed-rule-home-page. Regarding budget neutrality for the CY 2026 OPPS wage index, we refer readers to section II.C. of this final rule with comment period. We continue to believe that using the IPPS post-reclassified wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall.

Hospitals that are paid under the OPPS, but not under the IPPS, do not have an assigned hospital wage index under the IPPS. Therefore, for non-IPPS hospitals paid under the OPPS, it is our longstanding policy to assign the wage index that would be applicable if the hospital was paid under the IPPS, based on its geographic location and any applicable wage index policies and adjustments. We proposed to continue this policy for CY 2026. We refer readers to the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18217 through 18236) for a detailed discussion of the proposed changes to the FY 2026 IPPS wage indexes.

It has been our longstanding policy to allow non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a “section 505 out-migration county” (that is, a county identified under section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)) (Pub. L. 108-173). Applying this adjustment is consistent with our policy of adopting IPPS wage index policies for hospitals paid under the OPPS. We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage index adjustment if they are located in a section 505 out-migration county. This is the same out-migration adjustment policy that would apply if the hospital were paid under the IPPS. For CY 2026, we proposed to continue our policy of allowing non-IPPS hospitals paid under the OPPS to qualify for the outmigration adjustment if they are located in a section 505 out-migration county (section 505 of the MMA) (88 FR 49585 and 49586). Furthermore, we proposed that the wage index that would apply for CY 2026 to non-IPPS hospitals paid

under the OPPS would continue to include the rural floor adjustment and any policies and adjustments applied to the IPPS wage index. In addition, we proposed that the wage index that would apply to non-IPPS hospitals paid under the OPPS would include the 5 percent cap on wage index decreases and the previously described proposed transitional payment exception for hospitals significantly impacted by the discontinuation of the low wage index hospital policy. We did not receive any comments on these proposals and are finalizing as proposed.

For CMHCs, for CY 2026, we proposed to continue to calculate the wage index by using the post-reclassification IPPS wage index based on the CBSA where the CMHC is located. Furthermore, we proposed that the wage index that would apply to a CMHC for CY 2026 would continue to include the rural floor adjustment and any policies and adjustments applied to the IPPS wage index. In addition, the wage index that would apply to CMHCs would include the 5 percent cap on wage index decreases. Also, we proposed that the wage index that would apply to CMHCs would not include the outmigration adjustment because that adjustment only applies to hospitals.

We did not receive any public comments on these proposals, and we are finalizing our proposals regarding CMHC wage index calculations without modification.

Table 4A associated with the FY 2026 IPPS/LTCH PPS final rule (available via the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2026-ipps-final-rule-home-page) identifies counties that would be eligible for the out-migration adjustment. Table 2 associated with the FY 2026 IPPS/LTCH PPS final rule (available for download via the website noted previously) identifies IPPS hospitals that would receive the out-migration adjustment for FY 2026. We are including the outmigration adjustment information from Table 2 associated with the FY 2026 IPPS/LTCH PPS final rule as Addendum L to this final rule with comment period, with the addition of non-IPPS hospitals that would receive the section 505 outmigration adjustment under this final rule with comment period. Addendum L is available via the internet on the CMS website. We refer readers to the CMS website for the OPPS at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices. At this link, readers will find a link to the final FY 2026 IPPS wage index tables and Addendum L.

In addition to using CCRs to estimate costs from charges on claims for ratesetting, we use overall hospital-specific CCRs calculated from the hospital's most recent cost report (OMB control number: 0938-0050 for Form CMS-2552-10) to determine outlier payments, payments for pass- through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. For certain hospitals, under the regulations at 42 CFR 419.43(d)(5)(iii), we use the statewide average default CCRs to determine the payments mentioned earlier if it is not possible to determine an accurate CCR for a hospital in certain circumstances. This includes hospitals that are new, hospitals that have not accepted assignment of an existing hospital's provider agreement, and hospitals that have not yet submitted a cost report. We also use the statewide average default CCRs to determine payments for hospitals whose CCR falls outside the predetermined ceiling threshold for a valid CCR or for hospitals in which the most recent cost report reflects an all-inclusive rate status (Medicare Claims Processing Manual (Pub. L. 100-04), Chapter 4, Section 10.11).

We discussed our policy for using default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009. For details on our process for calculating the statewide average CCRs, we refer readers to the Claims Accounting Narrative for this final rule with comment period, which is posted on the CMS website. We proposed to calculate the default ratios for CY 2026 using the most recent cost report data.

We did not receive any public comments on our proposal, and we are finalizing our proposal without modification to calculate the default ratios for CY 2026 using the most recent cost report data, which are from a June 2025 HCRIS cost report extract.

We no longer publish a table in the Federal Register containing the statewide average CCRs in the annual OPPS/ASC proposed rule and final rule with comment period. These CCRs and the upper limit CCR value at which we would apply statewide CCRs will be available for download with each CY OPPS/ASC proposed rule and final rule with comment period on the CMS website. We refer readers to our website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices; click on the link on the left of the page titled “Annual Policy Files” and then select the relevant year to download the statewide CCRs and upper limits in the “Downloads” section of the web page.

E. Adjustment for Rural Sole Community Hospitals (SCHs) and Essential Access Community Hospitals (EACHs) Under Section 1833(t)(13)(B) of the Act for CY 2026

In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural sole community hospitals (SCHs) of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, items paid at charges reduced to costs, and devices paid under the pass-through payment policy, in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provides the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, items paid at charges reduced to costs, and devices paid under the pass-through payment policy, in accordance with section 1833(t)(13)(B) of the Act.

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised our regulations at Sec. 419.43(g) to clarify that essential access community hospitals (EACHs) are also eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, two hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), a hospital can no longer become newly classified as an EACH.

This adjustment for rural SCHs is budget neutral and applied before calculating outlier payments and

copayments. We stated in the CY 2006 OPPS final rule with comment period (70 FR 68560) that we would not reestablish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2025 (89 FR 93977).

For CY 2026, we proposed to continue the current policy of a 7.1 percent payment adjustment for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, items paid at charges reduced to costs, and devices paid under the pass-through payment policy, applied in a budget neutral manner (90 FR 33514).

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

Comment: Multiple commenters supported our proposal to continue to apply a 7.1 percent payment adjustment for rural SCHs, including EACHs, in CY 2026.

Response: We thank the commenters for their support of our proposal.

Comment: Several commenters stated that the 7.1 percent payment adjustment should be extended to urban SCHs and Medicare dependent hospitals (MDHs). The commenters stated MDHs are rural hospitals and suggested CMS perform another study to look at the costs that MDHs incur, and opined that CMS has the authority to extend the adjustment to MDHs and urban SCHs without legislation.

Response: We note that our authority for an adjustment under section 1833(t)(13)(B) of the Act only applies to rural hospitals, so we would not have authority to extend this adjustment to a hospital classified as urban. We are not performing another study under 1833(t)(13)(A) of the Act for this rule, but we will consider if this is appropriate for future rulemaking.

Comment: One commenter stated the supplemental adjustments for rural SCHs and EACHs are essential for their sustainability but stated recipients of these payments need greater accountability for improving beneficiary access. The commenter suggested that CMS publish annual data on outpatient service availability and closures or reductions of service, to ensure that these supplemental payments are tied to tangible results for patients.

Response: We thank the commenter for their input and will consider the suggestion for future rulemaking.

After consideration of these public comments, we are finalizing our proposal, without modification, to continue our current policy of utilizing a budget neutral 7.1 percent payment adjustment for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, devices paid under the pass-through payment policy, and items paid at charges reduced to costs.

Since the inception of the OPPS, which was authorized by the BBA, Medicare has paid the 11 hospitals that meet the criteria for cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered outpatient department services. These cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), the Congress added section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” which requires the Secretary to determine OPPS payments to cancer and children's hospitals based on their pre-BBA payment amount (these hospitals are often referred to under this policy as “held harmless” and their payments are often referred to as “hold harmless” payments).

As required under section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient department services under the OPPS and a “pre- BBA amount.” That is, cancer hospitals are permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not receive a payment that is lower in amount under the OPPS than the payment amount they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA amount” is the product of the hospital's reasonable costs for covered outpatient department services occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of the Act. The “pre-BBA amount” and the determination of the base PCR are defined at Sec. 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital Cost Report or the Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS- 2552-10 (OMB No: 0938-0050), respectively), as applicable each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Act (Pub. L. 111-148) amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed outpatient costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. Section 1833(t)(18)(A) of the Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by cancer hospitals and other hospitals. Section 1833(t)(18)(B) of the Act provides that, if the Secretary determines that cancer hospitals' costs are higher than those of other hospitals, the Secretary shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. In 2011, after conducting the study required by section 1833(t)(18)(A) of the Act, we determined that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. For a complete discussion regarding the cancer hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 and 74201).

Based on these findings, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects their higher outpatient costs, as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a policy to provide additional payments to the cancer hospitals so that each cancer hospital's final PCR for services provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recently submitted or settled cost report data that are available at the time of final rulemaking for the calendar year. The amount of the payment adjustment is made on an aggregate basis at cost report settlement. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals.

The TOPs are assessed, as usual, after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period. Table 9 displays the target PCR for purposes of the cancer hospital adjustment for CY 2012 through CY 2025. [GRAPHIC] [TIFF OMITTED] TR25NO25.016

Section 16002(b) of the 21st Century Cures Act (Pub. L. 114-255) amended section 1833(t)(18) of the Act by adding subparagraph (C), which requires that in applying Sec. 419.43(i) (that is, the payment adjustment for certain cancer hospitals) for services furnished on or after January 1, 2018, the Secretary shall use a target PCR that is 1.0 percentage point less than the target PCR that would otherwise apply. Section 16002(b) of the 21st Century Cures Act also provides that, in addition to the percentage reduction, the Secretary may consider making an additional percentage point reduction to the target PCR that takes into account payment rates for applicable items and services described under section 1833(t)(21)(C) of the Act for hospitals that are not cancer hospitals described under section 1886(d)(1)(B)(v) of the Act. Further, in making any budget neutrality adjustment under section 1833(t) of the Act, section 16002(b) of the 21st Century Cures Act provides that the Secretary shall not take into account the reduced expenditures that result from application of section 1833(t)(18)(C) of the Act.

We proposed to provide additional payments to the 11 specified cancer hospitals so that each cancer hospital's proposed PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals, generally using the most recent submitted or settled cost report data that are available, reduced by 1.0 percentage point, to comply with section 16002(b) of the 21st Century Cures Act. As discussed further below, we did not propose an additional reduction beyond the 1.0 percentage point reduction required by section 16002(b) of the 21st Century Cures Act for CY 2026.

To calculate the proposed CY 2026 target PCR, we proposed to use the same extract of cost report data from HCRIS used to estimate costs for the CY 2026 OPPS which, in most cases, would be the most recently available hospital cost reports. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled.

We then limited the dataset to the hospitals with CY 2024 claims data that we used to model the impact of the proposed CY 2026 APC relative payment weights (3,388 hospitals) because we believe it is appropriate to use the same set of hospitals that are being used to calibrate the modeled CY 2026 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2022 to 2024; however, the cost reporting periods were predominantly from fiscal years ending in 2023 and 2024. We then removed the cost report data of the 49 hospitals located in Puerto Rico from our dataset because we did not believe their cost structure reflected the costs of most hospitals paid under the OPPS, and, therefore, their inclusion may bias the calculation of hospital- weighted statistics. We also removed the cost report data of 12 hospitals because these hospitals had cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic file of 3,327 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS were approximately 88 percent of reasonable cost (weighted average PCR of 0.88). Therefore, after applying the 1.0 percentage point reduction, as required by section 16002(b) of the 21st Century Cures Act, using our standard process the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.87 for each cancer hospital.

In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81586 through 81589), we explained that we believe we should begin to take into consideration the PCR of non-cancer hospitals based on the most recently available data for calculating the target PCR. We noted that we do not know if the changes in the data that have yielded lower PCRs for non-cancer hospitals are likely to continue in future years or if, when data from after the PHE

is available, we will see the target PCR increase toward its historical norm. Therefore, in the CY 2024 OPPS/ASC final rule with comment period, we finalized our proposal to transition from the target PCR of 0.89 we finalized for CYs 2020 through 2024 (which included the 1.0 percentage point reduction as required by section 16002(b) of the 21st Century Cures Act) and incrementally reduce the target PCR by an additional 1.0 percentage point for each calendar year, beginning with CY 2024, until the target PCR equals the PCR of non-cancer hospitals calculated using the most recent data minus 1.0 percentage point as required by section 16002(b) of the 21st Century Cures Act. Therefore, utilizing this methodology, we finalized in the CY 2025 OPPS/ASC final rule with comment period (89 FR 93977 through 93980) our policy to reduce the CY 2024 target PCR of 0.88 by 1 percentage point and finalized a cancer hospital target PCR of 0.87 for CY 2025.

Since the target PCR based on the OPPS payments to other hospitals furnishing services under the OPPS would be 0.87 after applying the 1.0 percentage point reduction, as required by the section 16002(b) of the 21st Century Cures Act, and would equal the CY 2025 target PCR, it is no longer necessary to continue our transition policy of gradually reducing the pre-COVID-19 PHE target PCR by 1.0 percentage point in lieu of our target PCR calculation. For CY 2026 and subsequent years, we proposed to calculate the target PCR based on our longstanding target PCR calculation methodology described in the CY 2026 OPPS/ASC proposed rule, and then apply the 1.0 percentage point reduction as required by section 16002(b) of the 21st Century Cures Act.

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

Comment: Some commenters supported the cancer hospital payment adjustment while one commenter recommended the agency conduct a review to determine if the cancer hospital payment adjustment was still appropriate, including reviewing the accuracy of cost report information.

Response: As previously discussed, section 1833(t)(7)(D)(ii) of the Act requires that the cancer hospitals that meet the statutory criteria receive the full amount of the difference between payments for covered outpatient department services under the OPPS and a “pre-BBA amount.” Additionally, 1833(t)(18)(B) of the Act requires that if the Secretary determines that cancer hospitals' costs are higher than those of other hospitals, to provide an appropriate adjustment under section 1833(t)(2)(E) to reflect these higher costs. The statute does not provide flexibility to discontinue such cancer hospital payment adjustments. Further, we note that Medicare Administrative Contractors routinely perform audits on hospital cost reports to ensure accuracy and completeness.

Comment: One commenter supported the Agency's discontinuation of the gradual reduction policy but recommended that we reinstate such a policy in the future to avoid dramatic and unexpected negative reductions in the target PCR.

Response: We appreciate the commenter's support and will take their comment regarding reinstating the gradual reduction policy into consideration for future rulemaking.

After consideration of public comments we received, we are finalizing without modification our proposal to calculate the target PCR based on our longstanding target PCR calculation methodology described in this final rule with comment and then apply the 1.0 percentage point reduction as required by section 16002(b) of the 21st Century Cures Act. For this final rule with comment period, we are using the most recent cost report data through June 30, 2025 to update the adjustment. We limited the dataset to hospitals with CY 2024 claims data that we used to model the impact of the CY 2026 APC relative payment weights (3,395 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2026 OPPS. The cost report data for the hospitals in the dataset were from cost reporting periods with fiscal years ends ranging from 2019 to 2024. We then removed the cost report data of the 48 hospitals located in Puerto Rico from our dataset because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, therefore, their inclusion may bias the calculation of hospital- weighted statistics. We also removed the cost report data of 6 hospitals because these hospitals had cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to an analytic file of 3,341 hospitals with cost report data.

Using this smaller dataset of updated cost report data, we estimate that, on average, the OPPS payments to other hospitals furnishing services under the OPPS were approximately 88 percent of reasonable cost (weighted average PCR of 0.88). Therefore, after applying the 1.0 percentage point reduction, as required by section 16002(b) of the 21st Century Cures Act, we are finalizing a target PCR of 0.87. Table 10 shows the estimated percentage increase in OPPS payments to each cancer hospital for CY 2026, due to the cancer hospital payment adjustment policy. The actual, final amount of the CY 2026 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2026 payments and costs from the settled CY 2026 cost report. We note that the requirements contained in section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed, as usual, after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period. BILLING CODE 4120-0-P

[GRAPHIC] [TIFF OMITTED] TR25NO25.017

BILLING CODE 4120-0-C

The OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cost and complex procedures, where a very costly service could present a hospital with significant financial loss. As explained in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66832 through 66834), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for the prospective year. Outlier payments are provided on a service-by-service basis when the cost of a service exceeds the APC payment amount multiplier threshold (the APC payment amount multiplied by a certain amount) as well as the APC payment amount plus a fixed-dollar amount threshold (the APC payment plus a certain dollar amount). In CY 2025, the outlier threshold was met when the hospital's cost of furnishing a service exceeded 1.75 times the APC payment amount (the multiplier threshold) and exceeded the APC payment amount plus $7,175 (the fixed-dollar amount threshold) (89 FR 93980 through 93982). If the hospital's cost of furnishing a service exceeds both the multiplier threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the hospital's cost of furnishing the service exceeds 1.75 times the APC payment amount. Beginning with CY 2009 payments, outlier payments are subject to a reconciliation process similar to the IPPS outlier reconciliation process for cost reports, as discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).

It has been our policy to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the OPPS. Our estimate of total outlier payments as a percent of total CY 2024 OPPS payments, using CY 2024 claims available for this final rule with comment period, is approximately 0.82 percent. Therefore, for CY 2024, we estimate that we did not meet the outlier target by 0.18 percent of total aggregated OPPS payments.

For the CY 2026 OPPS/ASC proposed rule, using CY 2024 claims data and CY 2025 payment rates, we estimated that the aggregate outlier payments for CY 2025 would be approximately 0.92 percent of the total CY 2025 OPPS payments (90 FR 33517). We provided estimated CY 2026 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts--Provider-Specific Data file on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient. 2. Outlier Calculation for CY 2026

For CY 2026, we proposed to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS. We proposed that a portion of that 1.0 percent, an amount equal to less than 0.01 percent of outlier payments (or 0.0001 percent of total OPPS payments), would be allocated to CMHCs for partial hospitalization program (PHP) and intensive outpatient program (IOP) outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments. We proposed to continue our outlier policy that if a CMHC's cost for PHP and IOP services exceeds 3.40 times the APC payment rate, the outlier payment would be calculated as 50 percent of the amount

by which the cost exceeds 3.40 times the proposed APC payment rate.

For further discussion of CMHC outlier payments, we refer readers to section VIII.C. of this final rule with comment period.

To ensure that the estimated CY 2026 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the hospital outlier threshold be set so that outlier payments would be triggered when a hospital's cost of furnishing a service exceeds 1.75 times the APC payment amount and exceeds the APC payment amount plus the fixed-dollar threshold.

We calculated the proposed fixed-dollar threshold using the standard methodology most recently used for CY 2025 (89 FR 93980 through 93982). For purposes of estimating outlier payments for CY 2026, we used the hospital-specific overall ancillary CCRs available in the April 2025 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCRs, which are maintained by the MACs and used by the OPPS Pricer to pay claims. The claims that we generally use to model each OPPS update lag by 2 years.

To estimate the CY 2026 proposed hospital outlier payments (90 FR 33841), we inflated the charges on the CY 2024 claims using the same proposed charge inflation factor of 1.1118 that we used to estimate the IPPS fixed-loss cost threshold for the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18434 through 18436). We used an inflation factor of 1.05440 to estimate CY 2025 charges from the CY 2024 charges reported on CY 2024 claims before applying CY 2025 CCRs to estimate the percent of outliers paid in CY 2025. The proposed methodology for determining these charge inflation factors is discussed in the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18434). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65844 through 65846), we believed that the use of the same charge inflation factors is appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we were concerned that we could systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, we proposed to apply the same CCR adjustment factor that we proposed to apply for the FY 2026 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2026 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2026, we proposed to apply an adjustment factor of 0.970113 to the CCRs that were in the April 2025 OPSF to trend them forward from CY 2025 to CY 2026. The methodology for calculating the proposed CCR adjustment factor is discussed in the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18434 through 18435).

To model hospital outlier payments for the CY 2026 OPPS/ASC proposed rule, we applied the overall CCRs from the April 2025 OPSF after adjustment (using the proposed CCR inflation adjustment factor of 0.970113 to approximate CY 2026 CCRs) to charges on CY 2024 claims that were adjusted (using the proposed charge inflation factor of 1.1118 to approximate CY 2026 charges). We simulated aggregated CY 2024 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiplier threshold constant and assuming that outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2026 OPPS payments. We estimated that a proposed fixed-dollar threshold of $6,450 combined with the proposed multiplier threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS payments to outlier payments for CY 2026. For CMHCs, we proposed that, if a CMHC's cost for partial hospitalization or intensive outpatient services exceeds 3.40 times the APC payment rate, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC payment rate.

Section 1833(t)(17)(A) of the Act, which applies to hospitals, as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor; that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that would apply to certain outpatient items and services furnished by hospitals that are required to report outpatient quality data and that fail to meet the Hospital Outpatient Quality Reporting (OQR) Program requirements. For hospitals that fail to meet the Hospital OQR Program requirements, we proposed to continue the policy that we implemented in CY 2010 that the hospitals' costs would be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we refer readers to section XV. of this final rule with comment period.

We received one public comment in support of our proposal. After consideration of the public comment we received, we are finalizing our proposal, without modification, to continue to our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS and to use our established methodology to set the OPPS outlier fixed-dollar loss threshold for CY 2026. 3. Final Outlier Calculation for CY 2026

Consistent with historical practice, we used updated data for this final rule with comment period for outlier calculations. For CY 2026, we are applying the overall ancillary CCRs from the July 2025 OPSF file after adjustment (using the CCR adjustment factor of 0.956081 to approximate CY 2026 CCRs) to charges on CY 2024 claims that were adjusted using a charge inflation factor of 1.11313 to approximate CY 2026 charges. These are the same CCR adjustment and charge inflation factors that were used to set the IPPS fixed-dollar thresholds for the FY 2026 IPPS/LTCH PPS final rule (90 FR 37227). We simulated aggregated CY 2026 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple-threshold constant and assuming that outlier payments will continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payment equaled 1.0 percent of aggregated estimated total CY 2026 OPPS payments. We estimate that a final fixed-dollar threshold of $6,225 combined with the multiple threshold of 1.75 times the APC payment rate, will allocate 1.0 percent of aggregated total OPPS payments to outlier payments.

For CMHCs, if a CMHC's cost for partial hospitalization or intensive outpatient services exceeds 3.40 times the APC payment rate, the outlier payment will be calculated as 50 percent of the amount by which the cost

exceeds the 3.40 times the APC payment rate.

The national unadjusted payment rate is the payment rate for most APCs before accounting for the wage index adjustment or any applicable adjustments. The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at 42 CFR part 419, subparts C and D. For this final rule with comment period, the payment rate for most services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this final rule with comment period and the relative payment weight described in section II.A. of this final rule with comment period. The national unadjusted payment rate for most APCs contained in Addendum A 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-pps/quarterly-addenda-updates and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this final rule with comment period (which is available on the CMS website, see link above) is calculated by multiplying the final CY 2026 scaled weight for the APC by the CY 2026 conversion factor.

We note that section 1833(t)(17) of the Act, which applies to hospitals, as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program requirements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XIV. of this final rule with comment period.

Below we demonstrate the steps used to determine the APC payments that will be made in a CY under the OPPS to a hospital that fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “J1,” “J2,” “P,” “Q1,” “Q2,” “Q3,” “Q4,” “R,” “S,” “T,” “U,” or “V” (as defined in Addendum D1 to this final rule with comment period, which is available via the internet on the CMS website), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements.

Individual providers interested in calculating the payment amount that they would receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this final rule with comment period (which are available via the internet on the CMS website) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the reporting ratio of 0.9805 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the full national unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements to receive the full CY 2025 OPPS fee schedule increase factor.

Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementation of the OPPS, we have used 60 percent to represent our estimate of that portion of costs attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553), we confirmed that this labor-related share for hospital outpatient services is appropriate.

The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific payment rate for a specific service.

X is the labor-related portion of the national unadjusted payment rate. X = .60 * (national unadjusted payment rate).

Step 2. Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. The wage index values assigned to each area would reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2026 under the IPPS, reclassifications through the Medicare Geographic Classification Review Board (MGCRB), section 1886(d)(8)(B) “Lugar” hospitals, and reclassifications under section 1886(d)(8)(E) of the Act, as implemented in Sec. 412.103 of the regulations. For CY 2026, we proposed to apply for the CY 2026 OPPS wage index any adjustments for the FY 2026 IPPS post-reclassified wage index, including, but not limited to, the rural floor adjustment and a wage index floor of 1.00 in frontier states, in accordance with section 10324 of the Affordable Care Act of 2010. For further discussion of the wage index we are applying for the CY 2026 OPPS, including the low wage index hospital policy, we refer readers to section II.C. of this final rule with comment period.

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173). Addendum L to this final rule with comment period (which is available via the internet on the CMS website) contains the qualifying counties and the associated wage index increase developed for the final FY 2026 IPPS wage index, which are listed in Table 3 associated with the FY 2026 IPPS final rule and available via the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. (Click on the link on the left side of the screen titled “FY 2026 IPPS Final Rule Home Page” and select “FY 2026 Final Rule Tables.”) This step is to be followed only if the

hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

Step 4. Multiply the applicable wage index determined under Steps 2 and 3 by the amount determined under Step 1 that represents the labor- related portion of the national unadjusted payment rate.

The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the national unadjusted payment rate for the specific service by the wage index.

Xa is the labor-related portion of the national unadjusted payment rate (wage adjusted). Xa = labor-portion of the national unadjusted payment rate * applicable wage index.

Step 5. Calculate 40 percent (the nonlabor-related portion) of the national unadjusted payment rate and add that amount to the resulting product of Step 4. The result is the wage index adjusted payment rate for the relevant wage index area.

The formula below is a mathematical representation of Step 5 and calculates the remaining portion of the national payment rate, the amount not attributable to labor, and the adjusted payment for the specific service.

Y is the nonlabor-related portion of the national unadjusted payment rate. Y = 0.40 * (national unadjusted payment rate).

Step 6. If a provider is an SCH, as set forth in the regulations at Sec. 412.92, or an EACH, which is considered to be an SCH under section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as defined in Sec. 412.64(b), or is treated as being located in a rural area under Sec. 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment.

The formula below is a mathematical representation of Step 6 and applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 1.071.

Step 7. The adjusted payment rate is the sum of the wage adjusted labor-related portion of the national unadjusted payment rate and the nonlabor-related portion of the national unadjusted payment rate.

Xa is the labor-related portion of the national unadjusted payment rate (wage adjusted). Y is the nonlabor-related portion of the national unadjusted payment rate. Adjusted Medicare Payment = Xa + Y

We are providing examples below of the calculation of both the full and reduced national unadjusted payment rates that would apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the Hospital OQR Program requirements, using the steps outlined previously. For purposes of this example, we are using a provider that is located in Brooklyn, New York that is assigned to CBSA 35614. This provider bills one service that is assigned to APC 5071 (Level 1 Excision/Biopsy/Incision and Drainage). The final CY 2026 full national unadjusted payment rate for APC 5071 is $723.47. The final reduced national adjusted payment rate for APC 5071 for a hospital that fails to meet the Hospital OQR Program requirements is $709.36. This reduced rate is calculated by multiplying the reporting ratio of 0.9805 by the full unadjusted payment rate for APC 5071.

Step 1. The labor-related portion of the final full national unadjusted payment is approximately $434.08 (0.60 * $723.47). The labor-related portion of the final reduced national adjusted payment is approximately $425.62 (0.60 * $709.36).

Step 2 & 3. The FY 2026 wage index for a provider located in CBSA 35614 in New York, which includes the adoption of the final IPPS 2026 wage index policies, is 1.3697.

Step 4. The wage adjusted labor-related portion of the final full national unadjusted payment is approximately $594.56 ($434.08 * 1.3697). The wage adjusted labor-related portion of the final reduced national adjusted payment is approximately $582.97 ($425.62 * 1.3697).

Step 5. The nonlabor-related portion of the final full national unadjusted payment is approximately $289.39 (0.40 * $723.47). The nonlabor-related portion of the final reduced national adjusted payment is approximately $283.74(0.40 * $709.36).

Step 6. For this example of a provider located in Brooklyn, New York, the rural adjustment for rural SCHs does not apply.

Step 7. The sum of the labor-related and nonlabor-related portions of the final full national unadjusted payment is approximately $883.95 ($594.56 + $289.39). The sum of the portions of the final reduced national adjusted payment is approximately $866.71 ($582.97 + $283.74) as shown in Table 11. [GRAPHIC] [TIFF OMITTED] TR25NO25.018

We did not receive any public comments on these steps under the methodology that we included in the CY 2026 OPPS/ASC proposed rule to determine the APC payments for CY 2026. Therefore, we are using the steps in the methodology specified above to demonstrate the calculation of the final CY 2026 OPPS payments using the same parameters.

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that the effective copayment rate (determined on a national unadjusted basis) for that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in CYs thereafter, shall not exceed 40 percent of the APC payment rate.

Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or group of such services) furnished in a year, the national unadjusted copayment amount cannot be less than 20 percent of the OPD fee schedule

amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure (including items such as drugs and biologicals) performed in a year to the amount of the inpatient hospital deductible for that year.

Section 4104 of the Affordable Care Act eliminated the Medicare Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certain requirements, including flexible sigmoidoscopies and screening colonoscopies, and waived the Part B deductible for screening colonoscopies that become diagnostic during the procedure. For a discussion of the changes made by the Affordable Care Act with regard to copayments for preventive services furnished on and after January 1, 2011, we refer readers to section XII.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 72013).

Section 122 of the Consolidated Appropriations Act (CAA), 2021 (Pub. L. 116-260), Waiving Medicare Coinsurance for Certain Colorectal Cancer Screening Tests, amended section 1833(a) of the Act to offer a special coinsurance rule for screening flexible sigmoidoscopies and screening colonoscopies, regardless of the code that is billed for the establishment of a diagnosis as a result of the test, or for the removal of tissue or other matter or other procedure, that is furnished in connection with, as a result of, and in the same clinical encounter as the colorectal cancer screening test. We refer readers to section “X.B. Changes to Beneficiary Coinsurance for Certain Colorectal Cancer Screening Tests”, of the CY 2022 OPPS/ASC final rule with comment period for the full discussion of this policy (86 FR 63740 through 63743). Under the regulation at 42 CFR 410.152(l)(5)(i)(B), the Medicare Part B payment percentage for colorectal cancer screening tests described in the regulation at Sec. 410.37(j) that are furnished in CY 2023 through CY 2026 is 85 percent, with beneficiary coinsurance equal to 15 percent.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-169) was signed into law. Section 11101(a) of the IRA amended section 1847A of the Act by adding a new subsection (i), which requires the payment of rebates into the Supplementary Medical Insurance Trust Fund for Part B rebatable drugs if the payment limit amount exceeds the inflation-adjusted payment amount, which is calculated as set forth in section 1847A(i)(3)(C) of the Act. The provisions of section 11101 of the IRA were initially implemented through program instruction, as permitted under section 1847A(c)(5)(C) of the Act. On February 9, 2023 and December 14, 2023, we issued initial \9\ and revised \10\ guidance, respectively, implementing the Medicare Part B Inflation Rebate Program, including the computation of inflation-adjusted beneficiary coinsurance under section 1847A(i)(5) of the Act and amounts paid under section 1833(a)(1)(EE) of the Act.\11\ For additional information regarding implementation of section 11101 of the IRA, please see the inflation rebates resources page at https://www.cms.gov/inflation-reduction-act-and-medicare/inflation-rebates-medicare.

\9\ https://www.cms.gov/files/document/medicare-part-b-inflation-rebate-program-initial-guidance.pdf.

\10\ https://www.cms.gov/files/document/medicare-part-b-inflation-rebate-program-revised-guidance.pdf.

\11\ In addition, beginning with the April 2023 ASP Drug Pricing file, the file includes the coinsurance percentage for each drug and specifies “inflation-adjusted coinsurance” in the “Notes” column if the coinsurance for a drug is less than 20 percent of the Medicare Part B payment amount. Drug pricing files are available at https://www.cms.gov/medicare/medicare-fee-for-service-part-b-drugs/mcrpartbdrugavgsalesprice.

Section 11101(b) of the IRA amended sections 1833(i) and 1833(t)(8) of the Act by adding a new paragraph (9) and subparagraph (F), respectively. Section 1833(i)(9) of the Act requires under the ASC payment system that, in the case of a Part B rebatable drug for which payment is not packaged into a payment for a service, in lieu of calculation of coinsurance that would otherwise apply under the ASC payment system, the provisions of section 1847A(i)(5) of the Act shall, as determined appropriate by the Secretary, apply for calculation of beneficiary coinsurance in the same manner as the provisions of section 1847A(i)(5) of the Act apply under that section. Similarly, section 1833(t)(8)(F) of the Act requires under the OPPS that in the case of a Part B rebatable drug (except for a drug that has no copayment applied under subparagraph (E) of such section or for which payment is packaged into the payment for a covered OPD service or group of services), in lieu of the calculation of the copayment amount that would otherwise apply under the OPPS, the provisions of section 1847A(i)(5) of the Act shall, as determined appropriate by the Secretary, apply in the same manner as the provisions of section 1847A(i)(5) of the Act apply under that section. Section 1847A(i)(5) of the Act requires that for Part B rebatable drugs, as defined in section 1847A(i)(2)(A) of the Act, furnished on or after April 1, 2023, in quarters in which the payment amount described in section 1847A(i)(3)(A)(ii)(I) of the Act (or, in the case of selected drugs described under section 1192(c) of the Act, the payment amount described in section 1847A(b)(1)(B) of the Act), exceeds the inflation-adjusted payment amount determined in accordance with section 1847A(i)(3)(C) of the Act, the coinsurance will be 20 percent of the inflation-adjusted payment amount for such quarter (hereafter, the inflation-adjusted coinsurance amount). This inflation- adjusted coinsurance amount is applied as a percent, as determined by the Secretary, to the payment amount that would otherwise apply for such calendar quarter in accordance with section 1847A(b)(1)(B) or (C) of the Act, as applicable, including in the case of a selected drug described under section 1192(c) of the Act.

Paragraph (9) of section 1833(i) of the Act and subparagraph (F) of section 1833(t)(8) of the Act, as added by section 11101(b) of the IRA, also provide that in lieu of the amounts of payment otherwise applicable under the ASC payment system and the OPPS, the provisions of paragraph (1)(EE) of subsection (a) of section 1833 of the Act shall apply, as determined appropriate by the Secretary. Section 11101(b) of the IRA amended section 1833(a)(1) of the Act by adding a new subparagraph (EE), which requires that if the payment amount under section 1847A(i)(3)(A)(ii)(I) of the Act or, in the case of a selected drug described under section 1192(c) of the Act, the payment amount described in section 1847A(b)(1)(B) of the Act, for that drug exceeds the inflation-adjusted payment amount for a Part B rebatable drug, the Part B payment amount would, subject to the Part B deductible and sequestration, equal the difference between such payment amount and the inflation-adjusted coinsurance amount. Consistent with the policy adopted in section 40 of the revised Medicare Part B Drug Inflation Rebate Guidance, the calculation to determine the applicable beneficiary coinsurance amount would not be adjusted for sequestration. CMS codified the Medicare payment for Part B rebatable drugs in the CY 2024 PFS final rule by adding new paragraph (m) to Sec. 410.152 (88 FR 79043).

In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81594), we codified the OPPS program payment and cost as required by section 1833(t)(8)(F) of the Act by adding a new paragraph (e) to Sec. 419.41, which cross-references the regulations adopted in the CY 2024 PFS final rule (Sec. Sec. 410.152(m) and 489.30(b)(6)). We

also amended the regulation text to reflect our longstanding policies for calculating the Medicare program payment and cost sharing amounts for separately payable drugs and biologicals by adding a new paragraph (d) to Sec. 419.41. Similarly, we codified the ASC cost sharing amounts for Part B rebatable drugs as required by section 1833(i)(9) of the Act by revising Sec. 416.172(d) to include a cross-reference to 42 CFR 489.30(b)(6), which codified the cost sharing amounts for Part B rebatable drugs with prices increasing at a rate faster than inflation.

In the CY 2025 PFS final rule (89 FR 98228 through 98275), we codified regulations implementing section 11101 of the IRA in newly added 42 CFR part 427, chapter IV, including new provisions at Sec. Sec. 427.200 and 427.201 to codify the policies regarding the computation of the inflation-adjusted beneficiary coinsurance, defined in Sec. 427.200, for Part B rebatable drugs as required by section 1847A(i)(5) of the Act. As finalized, Sec. 427.201(a) establishes that CMS will use the methodology established in such section to calculate the inflation-adjusted beneficiary coinsurance and associated adjusted Medicare payment percentage and incorporates references to the existing provisions at Sec. Sec. 410.152(m), 419.41(e), and 489.30(b)(6). Section 427.201(c) provides that any category of products that is excluded from the identification of Part B rebatable drugs at Sec. 427.101(b) is not subject to the inflation-adjusted beneficiary coinsurance. Examples of these excluded products include separately payable radiopharmaceuticals, skin substitute products, and qualifying biosimilar biological products.

Section 427.201(b) sets forth the calculation of the inflation- adjusted beneficiary coinsurance. We will compare the payment amount in paragraph (b)(3) of such section to the inflation-adjusted payment amount for an applicable calendar quarter; if the payment amount exceeds the inflation-adjusted payment amount, the inflation-adjusted beneficiary coinsurance is calculated by multiplying the inflation- adjusted payment amount by 0.20. Section 427.201(b)(3) specifies that CMS will use the published payment amount in quarterly pricing files \12 13 14\ to determine if a Part B rebatable drug should have an adjusted beneficiary coinsurance. If so, such adjusted beneficiary coinsurance shall be equal to 20 percent of the inflation-adjusted payment amount as described in section 1847A(i)(3)(C) of the Act for a calendar quarter. This approach deviates from the rebate calculation approach set forth in Sec. 427.302, which relies on the specified amount defined at Sec. 427.20 even when the specified amount and the published payment amount in quarterly pricing files differ.

\12\ See: https://www.cms.gov/medicare/payment/part-b-drugs/asp-pricing-files.

\13\ See: https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/addendum-a-b-updates.

\14\ See: https://www.cms.gov/medicare/payment/prospective-payment-systems/ambulatory-surgical-center-asc/asc-payment-rates-addenda.

We note that the cost sharing amounts of rebatable drugs paid under the OPPS published in the quarterly Addendum A and B updates reflect the inflation-adjusted coinsurance applied as a percent of the payment amount that would otherwise apply in accordance with section 1847A(b)(1)(B) or (C) of the Act, as determined by the Secretary pursuant to 1847A(i)(5) of the Act using the methodology in Sec. 427.201. As we explained in the CY 2025 PFS final rule (89 FR 98237), this policy is intended to hold beneficiaries harmless in situations where the payment amount is calculated differently from the specified amount, and we believe this approach is consistent with the statutory language and appropriately reflects the differences in the statutory text of section 1847A(i)(5) of the Act, which sets forth the payment amount that is used to determine whether coinsurance should be adjusted, and section 1847A(i)(3)(A) of the Act, which sets forth the “specified amount” used to determine rebate amounts. We refer readers to the full discussion at 89 FR 98237 and 98238 for additional details. 2. OPPS Copayment Policy

For CY 2026, we proposed to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. We refer readers to the November 7, 2003 OPPS final rule with comment period for a discussion of that methodology (68 FR 63458). In addition, we proposed to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles. The final national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2026, are included in Addenda A and B to this final rule with comment period (which are available via the internet on the CMS website).

As discussed in section XIV.E. of this final rule with comment period, for CY 2026, the Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

We note that OPPS copayments may increase or decrease each year based on changes in the calculated APC payment rates, due to updated cost report and claims data, and any changes to the OPPS cost modeling process. However, as described in the CY 2004 OPPS final rule with comment period, the development of the copayment methodology generally moves beneficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459).

In the CY 2004 OPPS final rule with comment period (68 FR 63459), we adopted a new methodology to calculate unadjusted copayment amounts in situations including reorganizing APCs, and we finalized the following rules to determine copayment amounts in CY 2004 and subsequent years.

When an APC group consists solely of HCPCS codes that were not paid under the OPPS the prior year because they were packaged or excluded or are new codes, the unadjusted copayment amount would be 20 percent of the APC payment rate.

If a new APC that did not exist during the prior year is created and consists of HCPCS codes previously assigned to other APCs, the copayment amount is calculated as the product of the APC payment rate and the lowest coinsurance percentage of the codes comprising the new APC.

If no codes are added to or removed from an APC and, after recalibration of its relative payment weight, the new payment rate is equal to or greater than the prior year's rate, the copayment amount remains constant (unless the resulting coinsurance percentage is less than 20 percent).

If no codes are added to or removed from an APC and, after recalibration of its relative payment weight, the new payment rate is less than the prior year's rate, the copayment amount is calculated as the product of the new payment rate and the prior year's coinsurance percentage.

If HCPCS codes are added to or deleted from an APC and, after

recalibrating its relative payment weight, holding its unadjusted copayment amount constant results in a decrease in the coinsurance percentage for the reconfigured APC, the copayment amount would not change (unless retaining the copayment amount would result in a coinsurance rate less than 20 percent).

If HCPCS codes are added to an APC and, after recalibrating its relative payment weight, holding its unadjusted copayment amount constant results in an increase in the coinsurance percentage for the reconfigured APC, the copayment amount would be calculated as the product of the payment rate of the reconfigured APC and the lowest coinsurance percentage of the codes being added to the reconfigured APC.

We noted in the CY 2004 OPPS final rule with comment period that we would seek to lower the copayment percentage for a service in an APC from the prior year if the copayment percentage was greater than 20 percent. We noted that this principle was consistent with section 1833(t)(8)(C)(ii) of the Act, which accelerates the reduction in the national unadjusted coinsurance rate so that beneficiary liability will eventually equal 20 percent of the OPPS payment rate for all OPPS services to which a copayment applies, and with section 1833(t)(3)(B) of the Act, which achieves a 20 percent copayment percentage when fully phased in and gives the Secretary the authority to set rules for determining copayment amounts for new services. We further noted that the use of this methodology would, in general, reduce the beneficiary coinsurance rate and copayment amount for APCs for which the payment rate changes as the result of the reconfiguration of APCs and/or recalibration of relative payment weights (68 FR 63459).

We did not receive any public comments on our proposal and we are finalizing our proposal to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. The finalized national unadjusted copayment amounts for services payable under the OPPS that will be effective January 1, 2026, are included in Addenda A and B to the CY 2026 OPPS/ASC final rule (which are available on the CMS website). 3. Calculation of an Adjusted Copayment Amount for an APC Group

Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a given service provided by a hospital that met or failed to meet its Hospital OQR Program requirements should follow the formulas presented in the following steps.

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its proposed payment rate. For example, using APC 5071, $144.69 is 20 percent of the full national unadjusted payment rate of $723.47. For APCs with only a minimum unadjusted copayment in Addenda A and B to this final rule with comment period (which are available via the internet on the CMS website), the beneficiary payment percentage is 20 percent.

The formula below is a mathematical representation of Step 1 and calculates the national copayment as a percentage of national payment for a given service.

B is the beneficiary payment percentage. B = National unadjusted copayment for APC/national unadjusted payment rate for APC.

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this final rule with comment period. Calculate the rural adjustment for eligible providers, as indicated in Step 6 under section II.H. of this final rule with comment period.

Step 3. Multiply the percentage calculated in Step 1 by the payment rate calculated in Step 2. The result is the wage-adjusted copayment amount for the APC.

The formula below is a mathematical representation of Step 3 and applies the beneficiary payment percentage to the adjusted payment rate for a service calculated under section II.H. of this final rule with comment period, with and without the rural adjustment, to calculate the adjusted beneficiary copayment for a given service.

Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment * B. Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted Medicare Payment * 1.071) * B.

Step 4. For a hospital that failed to meet its Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.9805.

The unadjusted copayments for services payable under the OPPS that would be effective January 1, 2026, are shown in Addenda A and B to this final rule with comment period (which are available via the CMS website). We note that the final national unadjusted payment rates and copayment rates shown in Addenda A and B to this final rule with comment period reflect the CY 2026 OPD fee schedule increase factor discussed in section II.B. of this final rule with comment period.

In addition, as noted earlier, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

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

Comment: Several commenters requested CMS reconsider the coinsurance policy for diagnostic radiopharmaceuticals on pass-through status, that are above the radiopharmaceutical packaging threshold. The commenters disagreed that these radiopharmaceuticals are no longer considered policy-packaged under Sec. 419.2(b)(15) and instead, treated like separately payable drugs assigned to an APC, and subject to a coinsurance. The commenters believe the coinsurance on diagnostic radiopharmaceuticals on pass-through status will be too financially burdensome for beneficiaries and undermines the intent of the statute and the advantages of having pass-through status. The commenters stated if both pass-through and non-pass-through diagnostic radiopharmaceuticals are subject to coinsurance, the commenters believe the distinction between these categories become meaningless. The commenters request CMS to clarify how the current policy and the cost- sharing calculations for diagnostic radiopharmaceuticals meets the intent of the statute.

Response: We disagree with the commenter's interpretation that these diagnostic radiopharmaceuticals would remain policy-packaged under 42 CFR 419.2(b)(15) after we implemented the CY 2025 diagnostic radiopharmaceuticals separate payment policy (89 FR 93948). We consider diagnostic radiopharmaceuticals to be drugs for purposes of pass- through payment (89 FR 94226). We note the copayment for pass-through drugs depends on their OPPS payment status absent pass-through status. For example, if a drug is policy-packaged, the pass-through payment amount is equal to a payment rate calculated using the ASP methodology (89 FR 94226). In accordance with section 1833(t)(8) of the Act, there is no copayment on the pass-through payment amount. Therefore, policy packaged drugs have a zero-dollar copayment amount when granted OPPS drug pass-through status.

However, for those drugs that do not fall into the category of policy packaged drugs, those drugs are separately payable drugs in the OPPS. The pass-through amount is the difference between the amount authorized under section 1842(o) of the Act, which is generally ASP plus 6 percent, and the portion of the otherwise applicable OPD fee schedule, which is also generally ASP plus 6 percent, is $0 (89 FR 94225 through 94226). We reiterate that the copayment for pass-through drugs depends on their OPPS payment status absent pass-through status. Therefore, the copay amount, absent pass-through status, under the OPD fee are still subject to the co-insurance established by section 1833(t)(3)(B) of the Act and Sec. 419.41(d) for separately payable drugs. We refer readers to the CY 2026 OPPS/ASC proposed rule for further discussion on pass- through payment for drugs, biologicals, and radiopharmaceuticals (90 FR 33614).

We also note that the co-insurance for a separately payable drug under the OPPS shall not exceed the amount of inpatient hospital deductible for that year.

Comment: One commenter suggested beneficiaries should not be responsible for drug pricing increases and that CMS should limit or eliminate cost-sharing for beneficiaries, citing the unintended consequences and negative effects on access to health care and health outcomes (such as reduced use of medically necessary services), and increased use of emergency rooms.

Response: We thank the commenter for the input. We note that the beneficiary copayment is established by section 1833(t)(3)(B) of the Act and Sec. 419.41(d). Section 1833(t)(8)(F) of the Act provides for an adjustment to the beneficiary coinsurance for Part B drugs and biologicals that are not packaged into payment for an OPD service with prices that have increased faster than the rate of inflation beginning April 1, 2023. In the CY 2024 OPPS/ASC final rule with comment period and the CY 2024 PFS final rule, we codified this inflation-adjusted coinsurance amount at Sec. Sec. 419.41(e), 410.152(m), and 489.30(b)(6), respectively. For these drugs and biologicals, the beneficiary coinsurance is 20 percent of the inflation-adjusted payment amount, which is less than what the beneficiary would pay in coinsurance otherwise. Therefore, beneficiaries are insulated from coinsurance amounts calculated based on drug prices that outpace inflation. More information about the beneficiary coinsurance adjustment and the Medicare Part B Inflation Rebate Program is available at https://www.cms.gov/inflation-reduction-act-and-medicare/inflation-rebates-medicare.