Medicare Final Rule Ends Breakthrough Device Shortcut to Add-On Payments

Medical devices designated as breakthroughs by the FDA will no longer qualify automatically for Medicare's extra hospital payments for new technology, under a final rule published in the Federal Register on Tuesday.

In its fiscal 2027 inpatient prospective payment system final rule, the Centers for Medicare & Medicaid Services finalized its proposal to repeal the alternative pathway for new technology add-on payments, known as NTAP, beginning with applications for fiscal 2028. The rule also ends the corresponding alternative pathway for outpatient device pass-through payments.

What changes

Beginning with fiscal 2021 applications, devices in the FDA's Breakthrough Devices Program that received marketing authorization for the designated indication, along with qualified infectious disease products and, from fiscal 2022, certain antibacterial and antifungal drugs approved under a limited-population pathway, have been treated as not substantially similar to existing technology. They did not have to show that they substantially improve the diagnosis or treatment of Medicare beneficiaries, though they still had to meet newness and cost tests.

Under the final rule, all applicants will have to meet the three standard criteria: the technology must be new, it must be costly enough that the usual payment is inadequate, and it must demonstrate a substantial clinical improvement over existing services or technologies. CMS also ended a conditional approval process for antimicrobial products, so all applicants will need FDA marketing authorization by May 1 of the year before the fiscal year in question.

CMS said that as it gained experience it had concerns with the limited evaluation process for alternative pathway applications. It also noted that a technology that does not receive add-on payments is still paid for through the regular diagnosis-related group payment, and that the change does not affect whether hospitals can use it. STAT reported the finalized repeal on Monday, quoting the rule as saying the requirement "ensures that additional Medicare payments are used to support Medicare beneficiaries' access to innovations that are demonstrated to improve outcomes compared to the currently available treatment." In the rule, that language is attributed to a comment from the Medicare Payment Advisory Commission, which said it had opposed using the breakthrough designation to qualify for add-on payments since its comments on the fiscal 2020 rule.

Grandfather period

After public comments, CMS modified its proposal to add a transition. A device that holds a breakthrough designation as of September 30, 2026 and receives marketing authorization for the designated indication by May 1, 2028 may still apply for add-on payments under the alternative pathway for fiscal 2028 and 2029. Breakthrough devices designated by the same date may also still apply for outpatient pass-through payment under the alternative pathway for calendar 2028 and 2029. Technologies already approved under the alternative pathway, including those approved for fiscal 2027, remain eligible for continued payments.

Some commenters opposed the repeal. According to the rule, one argued that a separate coverage effort could not substitute for the pathway because its eligibility requirements may make it unavailable to many breakthrough devices cleared through the 510(k) process.

Fiscal 2027 approvals

For fiscal 2027, CMS said it is approving 19 new technologies for add-on payments: 3 under the traditional pathway and 16 breakthrough devices under the alternative pathway, and continuing payments for 41 technologies approved earlier. It estimated payments for the 16 alternative-pathway devices at about $418 million for the year. Applications listed in the rule include the Bayesian Health Sepsis Flagging Device, the Ceribell Delirium Monitor System and the Gore Viabahn Fortegra Venous Stent.