Key Takeaways:

• CMS has proposed repealing the alternative pathways for New Technology Add-on Payment (NTAP) and Outpatient Prospective Payment System (OPPS) device pass-through payment, effective for NTAP applications beginning in FY 2028 and OPPS pass-through applications received on or after October 1, 2026.
• If this proposal is finalized, all applicants for these enhanced Medicare payments would be required to demonstrate that they meet the newness, cost, and substantial clinical improvement criteria, regardless of FDA Breakthrough Device, QIDP, or LPAD designations. This requirement will require developers of innovative treatments to develop significant clinical data before they are able to access these supplemental payments.
• The proposal’s potential impact on innovation incentives, Medicare reimbursement planning, and market access strategies for new medical technologies suggest affected parties should carefully evaluate the proposal and consider submitting comments.

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Overview

On April 14, 2026, the Centers for Medicare & Medicaid Services (CMS) published the Fiscal Year (FY) 2027 Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System proposed rule in the Federal Register. One consequential proposal in this year’s rulemaking is CMS’s plan to repeal the alternative pathways for New Technology Add-on Payment (NTAP) and OPPS device pass-through payment, and to propose modifications to the newness criterion applicable to NTAP eligibility.

Background

The NTAP program provides additional payments to hospitals for the use of qualifying new technologies whose costs are not adequately reflected in the existing Medicare Severity Diagnosis-Related Group (MS-DRG) relative weights that serve as the basis for Medicare’s Inpatient Prospective Payment System (IPPS). To be eligible for NTAP, a technology must satisfy three criteria: (1) the technology must be “new” (i.e., not substantially similar to an existing technology and within a 2-to-3-year newness window); (2) the MS-DRG payment rate must be inadequate to cover the cost of the new technology; and (3) the technology must represent a substantial clinical improvement over existing services or technologies.

In the Outpatient Prospective Payment System (OPPS), the OPPS device pass-through payment system similarly provides temporary additional payments for certain new devices, and includes a requirement that devices demonstrate substantial clinical improvement.

Beginning with applications for FY 2021 NTAP, CMS established alternative pathways that exempted certain categories of technologies from the newness/substantial similarity evaluation and the substantial clinical improvement criterion. The alternative pathways were initially created because FDA Breakthrough Designation requires FDA to determine that a new technology represents a significant improvement over existing technology. The alternative pathways were intended to facilitate quick access for Medicare patients to technology that FDA had already accelerated market access.

Under these alternative pathways, FDA-designated Breakthrough Devices, Qualified Infectious Disease Products (QIDPs), and drugs approved under the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) were considered not substantially similar to existing technologies and did not need to demonstrate that they substantially improve the diagnosis or treatment of Medicare beneficiaries. These technologies still needed to be within the 2-to-3-year newness period and meet the cost criterion. CMS established a parallel alternative pathway for OPPS device pass-through payments for Breakthrough Devices in the CY 2020 OPPS/ASC final rule.

Proposed Repeal of the Alternative Pathways

CMS is now proposing to repeal the alternative pathways for both NTAP and OPPS device pass-through payments. Specifically:

• For NTAP, beginning with applications received for FY 2028 and subsequent fiscal years, all applicants—including those with FDA Breakthrough Device, QIDP, or LPAD designations—would need to satisfy all three eligibility criteria at § 412.87(b): newness, cost, and substantial clinical improvement. Technologies currently under review for FY 2027 under the alternative pathway would remain eligible for consideration under that pathway, and technologies previously approved for add-on payments under the alternative pathway would continue to receive those payments.
• For OPPS device pass-through payments, all applications received on or after October 1, 2026—including applications received through the remainder of the CY 2028 OPPS application cycle ending on March 1, 2027—would need to demonstrate substantial clinical improvement under § 419.66(c)(2)(i). Applications submitted as of September 30, 2026 for Breakthrough Devices would be evaluated and could still be approved under the alternative pathway.
• CMS also proposes to eliminate the conditional approval process for antimicrobial products (QIDPs and LPADs) that had allowed technologies to begin receiving payments before obtaining FDA marketing authorization by July 1 of the applicable fiscal year. Beginning with FY 2028 applications, all applicants would need to receive FDA marketing authorization by May 1 of the year prior to the beginning of the fiscal year.

CMS’s Stated Rationale

CMS articulates several reasons for proposing the repeal. The agency states that it has concerns with the “limited evaluation process” for alternative pathway applications and believes it is in the best interest of Medicare patients to ensure that all new technologies approved for add-on payments have demonstrated that they are not substantially similar to existing technologies and represent a substantial clinical improvement. CMS notes that the FDA designation criteria (such as Breakthrough Device status) serve different statutory purposes than the Medicare substantial clinical improvement standard. The agency further states that requiring all applicants to meet the same criteria would ensure that all applications undergo the same CMS review process, including the opportunity to present at the New Technology Town Hall Meeting on substantial clinical improvement.

CMS also emphasizes that technologies that do not receive NTAP or OPPS pass-through payments can still be used by hospitals and will continue to be paid through regular payment mechanisms.

Implications for Innovative Technologies and Providers

The proposed repeal, if finalized, would have significant implications for medical technology manufacturers, hospitals, and other participants in the Medicare program.

For manufacturers and technology developers, the elimination of alternative pathways raises the evidentiary bar for obtaining NTAP or OPPS device pass-through payment status. Companies that had relied on FDA Breakthrough Device designation or other special pathways as a route to Medicare add-on payments would need to develop and present robust clinical evidence of substantial clinical improvement relative to existing technologies. This may require additional clinical trials, expanded data collection, or more extensive comparative effectiveness analyses, potentially increasing the time and cost associated with obtaining Medicare payment for new technologies. The elimination of the conditional approval process for antimicrobial products also removes a mechanism that had allowed certain drugs to begin receiving NTAP payments sooner after FDA approval or clearance.

For hospitals, the proposed changes could affect the financial incentives associated with adopting new technologies during the period before their costs are reflected in MS-DRG weights. A reduction in the number of technologies receiving NTAP approval could slow the adoption of certain innovations or shift greater financial risk to hospitals that choose to provide access to new technologies prior to DRG recalibration.

For the broader health care innovation ecosystem, the proposal signals CMS’s intent to more closely scrutinize the relationship between FDA designations and Medicare payment determinations.

Comment Period and Next Steps

As a proposed rule, the FY 2027 IPPS/LTCH PPS rule is subject to public notice and comment. Stakeholders who wish to weigh in on the proposed repeal of alternative pathways and the proposed modifications to the newness criterion should submit comments to CMS during the designated comment period, which closes on June 10, 2026. CMS will review submitted comments and may modify, retain, or withdraw the proposals in the final rule, which is expected to be published in August 2026.

Interested parties should carefully consider whether to submit comments addressing the clinical, economic, and policy implications of the proposed changes, including how they have relied on these pathways when developing reimbursement strategies and making investment decisions for products in their pipelines. Comments that provide concrete data, patient impact analyses, or alternative policy proposals are most likely to receive substantive agency consideration. Particular areas for comment include whether the substantial clinical improvement criterion is appropriately calibrated for the types of technologies that previously qualified under the alternative pathways, and whether the proposed newness period modifications adequately account for legitimate delays in commercial availability.

Conclusion

CMS’s proposal to repeal the NTAP and OPPS device pass-through payment alternative pathways, combined with its proposed tightening of the newness criterion, represents a significant shift in Medicare payment policy for new technologies. Stakeholders across the health care sector—including medical device and pharmaceutical manufacturers, hospitals, investors, and trade associations—should evaluate the potential impact of these proposals on their operations, investment strategies, and patient access considerations. We will continue to monitor developments as the rulemaking process proceeds and will provide updates following publication of the final rule.