CMS CY 2027 OPPS: Software as a Medical Service (SaMS) & Status Indicator O1

For digital health manufacturers, clinical AI developers, and diagnostic software innovators, securing hospital outpatient reimbursement in the United States has historically been an uphill battle against structural Medicare payment packaging. While the Food and Drug Administration (FDA) evaluates Software as a Medical Device (SaMD) for safety and clinical effectiveness, the Centers for Medicare & Medicaid Services (CMS) operates under entirely separate statutory payment rules under Title XVIII of the Social Security Act. For years, algorithmic imaging analysis, automated diagnostic screening, and computational clinical decision support were frequently bundled into existing hospital procedural Ambulatory Payment Classifications (APCs), leaving hospitals with no separate facility reimbursement to offset software subscription or per-use license costs.

CMS issued the CY 2027 OPPS/ASC proposed rule on July 2, 2026 and published it in the Federal Register on July 7, 2026 as CMS-1850-P, 91 FR 41734, document 2026-13656. Among other hospital-outpatient proposals, CMS proposed an interim CY 2027 payment structure for algorithmic clinical software.

The agency proposed to stop using the generic IT phrase "Software as a Service" (SaaS) in favor of Software as a Medical Service (SaMS), create OPPS status indicator O1, designate 36 HCPCS codes as SaMS on Table 61, reassign 21 of those codes from clinical APCs (status indicator S) to New Technology APCs with O1, keep already-assigned New Technology APC SaMS on those APCs while updating the status indicator to O1, and move 10 algorithm-only laboratory analysis codes off the Clinical Laboratory Fee Schedule (CLFS) on Table 62. Designation as SaMS is not the same as separate payment: CMS also proposes to keep currently Q1, N, E1, or M assignments for other designated codes rather than automatically converting every Table 61 row to O1.

Trade coverage has framed the package as a revamp of how Medicare pays for clinical software and AI. That headline overstates the instrument. CMS-1850-P is still a proposed interim assignment change. A generic search for "Software as a Medical Service" currently ranks CMS's inpatient NTAP page and the CMMI ACCESS model—neither of which defines proposed status indicator O1.

The Core Direct Answer: CMS-1850-P is a proposed rule, not current law and not an FDA device classification decision. To be assured consideration, comments must be received by August 31, 2026, file code CMS-1850-P. If adopted in the CY 2027 OPPS final rule (typically issued in early November), the payment policies would apply beginning January 1, 2027.

Under the proposed framework:

• Terminology shift: CMS would use Software as a Medical Service (SaMS) for software-based technologies that support clinical decision making through algorithmic analysis, including clinical or diagnostic functionality, because SaaS is used for general cloud-based computing outside a health-care context.
• Table 61 (36 HCPCS codes): CMS would designate 36 existing codes as SaMS. Of these, 21 codes currently paid separately under clinical APCs (status indicator S) would move to New Technology APCs that closely align with CY 2026 rates, with proposed status indicator O1. Codes already on New Technology APCs for CY 2026 would stay on those APCs, with the status indicator updated to O1. Codes that are currently Q1 (conditionally packaged), N, E1, or M would keep those indicators.
• Status indicator O1: Defined as "Software as a Medical Service, paid under OPPS; separate APC payment." CMS proposes that O1 have the same payment specifications as status indicator S (separate APC payment; S is not discounted when multiple). CMS also asks whether a T-like indicator—subject to multiple-procedure discounting—would better address program-integrity concerns when multiple SaMS codes appear on one claim.
• Table 62 (10 HCPCS codes): CMS identifies 10 currently payable SaMS analyses performed on laboratory tests under the CLFS and proposes New Technology APC assignment with O1, because the listed descriptors describe algorithmic analysis rather than laboratory methods. Rate warning: OPPS assignment uses New Technology APC cost bands, so the APC amount will not exactly match the current CLFS fee. CMS's worked example maps a code paid $430.17 on the CLFS to APC 1506 ($401–$500) at a standardized $450.50.
• Not on Table 61 or 62: If your code is omitted, it remains packaged or paid under its historical indicator. The action by August 31, 2026, is a public comment requesting inclusion or an explanation of the omission—not a claim that FDA-cleared SaMD is already O1.
• Cost and program scope: There is no CMS SaMS application fee; designation is an agency assignment of existing codes. Proposed O1 is an OPPS hospital-outpatient construct. It does not set Physician Fee Schedule office payment, replace FDA marketing authorization, equal OPPS device pass-through (status H under 42 CFR § 419.66), or create an inpatient NTAP.

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Status Summary: CY 2027 CMS OPPS SaMS Proposed Framework

The following matrix outlines the core legal, operational, and financial dimensions of the CY 2027 OPPS SaMS proposed interim payment policy:

Dimension	CMS-1850-P Proposed Rule Specification
Regulatory Instrument	CMS-1850-P (91 FR 41734, document 2026-13656; issued July 2, 2026; published July 7, 2026).
Rulemaking Status	Proposed rule; not finalized.
Comment Deadline	August 31, 2026 (Federal Register DATES). File code CMS-1850-P; Regulations.gov docket CMS-2026-2344-0002.
Effective Date (If Finalized)	January 1, 2027 (ordinary OPPS update cycle, not a separate SaMS statute).
Policy Duration	Interim payment policy for CY 2027 while CMS examines a longer-term SaMS methodology.
Terminology Shift	Replace "Software as a Service" (SaaS) with "Software as a Medical Service" (SaMS) for algorithmic clinical/diagnostic software.
New Status Indicator	O1 (Software as a Medical Service, paid under OPPS; separate APC payment). Proposed definition in Table 63; complete indicator list in Addendum D1.
Payment Specifications	Proposed to match status indicator S (separate APC payment; S is not discounted when multiple). Comment requested on a T-like multiple-procedure-discount alternative.
Table 61 Scope	36 HCPCS codes designated as SaMS. 21 currently separately paid clinical-APC (S) codes would move to New Technology APCs with O1. Already-on-New-Technology-APC codes would stay and update to O1. Currently Q1/N/E1/M codes would keep those indicators.
Table 62 Scope	10 currently payable SaMS laboratory-analysis codes on the CLFS, proposed for New Technology APCs with O1. Do not add 36 and 10 into one census without opening both tables.
Rate Continuity	The 21 clinical-APC reassignments aim for approximate CY 2026 rate alignment. Table 62 uses APC cost bands (official example: CLFS $430.17 → APC 1506 at $450.50). Already-on-New-Technology-APC SaMS would keep current APC assignments under section 1833(t)(2)(E).
Setting Applicability	Medicare fee-for-service hospital outpatient claims. Does not itself set ASC, PFS, Medicare Advantage, or commercial rates.
Government Filing Fees	No CMS SaMS application fee. Comments are free. FDA MDUFA user fees apply separately to marketing submissions.

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What Did CMS-1850-P Actually Propose for Software as a Medical Service?

In the CY 2027 OPPS proposed rule, CMS tackles a long-standing challenge in hospital outpatient reimbursement: how to adequately pay for advanced algorithmic clinical decision support and diagnostic software without distorting established prospective payment bundles.

Retiring "SaaS" in Favor of "SaMS"

Historically, CMS referred to these algorithm-driven clinical services as "Software as a Service" (SaaS). In section X.B of CMS-1850-P, the agency proposes a terminology change. The Federal Register text states that SaaS is used in other industries for general cloud-based computing service models outside a health-care context, which may cause confusion when CMS uses the same phrase for OPPS/ASC payment policy. To dispel that ambiguity, CMS proposes to use Software as a Medical Service (SaMS) for "software-based technologies that support clinical decision making through algorithmic analysis, including those that provide clinical or diagnostic functionality."

That is a payment-policy label, not an FDA classification. Software used only for administrative, transcription, scheduling, or general data storage remains hospital overhead packaged into facility fees. CMS also distinguishes SaMS from prescription digital therapeutics and from remote physiologic/therapeutic monitoring.

To explore how the FDA and global regulators qualify standalone cloud software, see SaMD vs SiMD: Where Cloud Software Fits.

Question	If yes	If no
Is the service billed on a Medicare hospital-outpatient claim?	Continue. Proposed O1 is an OPPS construct.	Physician-office, ASC, and Medicare Advantage payment follow other rules.
Does the software provide algorithmic clinical or diagnostic analysis, rather than general IT, transcription, or scheduling?	It is in the proposed SaMS concept. Check the tables.	Packaged as hospital overhead; not SaMS.
Is the HCPCS code on Table 61 among the 21 currently paid under clinical APCs (status S)?	Proposed New Technology APC + O1, with approximate CY 2026 rate continuity.	Check the next rows.
Is it already on a New Technology APC for CY 2026 and designated SaMS?	Keep the APC; update the status indicator to O1. Section III.C uses section 1833(t)(2)(E) to maintain current assignments rather than applying standard low-volume/claims rate-setting.	Check Table 62 and the packaged rows.
Is it on Table 62 (algorithm-only lab analysis currently on the CLFS)?	Proposed New Technology APC + O1. The APC midpoint will not exactly equal the CLFS fee (official example: $430.17 → APC 1506 at $450.50).	If omitted, comment by August 31, 2026, or keep the current packaged/unpaid path.
Is it designated SaMS but currently Q1, N, E1, or M?	CMS proposes to keep those indicators, not auto-convert them to O1.	—

Why Clinical APCs Failed to Capture Software Costs

Under standard OPPS mechanics, hospital outpatient services are grouped into clinical APCs based on clinical similarity and median resource utilization calculated from historical Medicare claims data. However, CMS acknowledged in the proposed rule that clinical APCs have proven structurally ill-suited for standalone algorithmic software:

1. Non-Material Cost Structure: Unlike physical implantable hardware or single-use surgical disposables, algorithmic software incurs zero physical material or device acquisition costs on standard hospital cost reports.
2. Variable Hospital Acquisition Models: Hospitals acquire SaMS via diverse models—annual enterprise subscriptions, per-click usage tiers, bundled hardware-software leases, or third-party service fees. When hospitals submit claims, these software costs are rarely captured accurately in hospital cost-to-charge ratios (CCRs).
3. Severe Payment Dilution: When bundled into a broad clinical APC (such as a routine diagnostic CT or echocardiography APC), the high cost of the software license is diluted across thousands of claims that did not utilize the algorithm, driving median calculated costs down and leading to underpayment.

To address these distortions, CMS proposed an interim payment policy for CY 2027: reassign the 21 currently separately paid clinical-APC SaMS codes to New Technology APCs, keep already-on-New-Technology-APC SaMS on those APCs, create status indicator O1, and—separately—crosswalk Table 62 laboratory analyses from the CLFS into New Technology APCs. Codes that are designated SaMS but currently conditionally packaged or not separately paid would keep their current indicators.

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Is Your Code on Table 61, Table 62, Already on a New Technology APC, or Not Designated?

Manufacturers and hospital reimbursement managers must determine exactly where their technology sits across the proposed rule's structural tables.

Table 61: The 36 Designated SaMS Codes

Table 61 of CMS-1850-P lists the HCPCS codes CMS proposes to designate as SaMS. The 36-code census is not 36 automatic O1 payments. CMS splits the operational result as follows:

1. 21 codes currently paid separately under clinical APCs (status indicator S): reassigned to New Technology APCs that closely align with CY 2026 payment, with proposed status indicator O1.
2. Codes already assigned to New Technology APCs for CY 2026: remain on those APCs for CY 2027, with the status indicator updated to O1. Section III.C proposes to maintain those assignments under section 1833(t)(2)(E) of the Social Security Act rather than applying the usual universal low-volume policy or claims-based geometric-mean reassignment. Official examples include CPT 75577 (AI-QCT plaque analysis) remaining on APC 1511 at $950.50, and CPT 0721T / 0722T (Optellum Lung Cancer Prediction) remaining on APC 1508 at $650.50.
3. Currently Q1, N, E1, or M codes that CMS still considers SaMS: keep those indicators. CMS considered moving conditionally packaged (Q1) SaMS to New Technology APCs with separate payment, or unconditionally packaging them as N, and rejected both for CY 2027 to avoid disrupting access.

The Table 61 graphic itself is published as a TIFF in the Federal Register. The American Urological Association's reading of the display copy treats CPT 0898T (Noninvasive prostate cancer estimation map, derived from augmentative analysis of image-guided fusion biopsy and pathology...) as currently in clinical APC 5724 (AUA-stated national payment $877) and proposed for New Technology APC 1510 ($801–$900). Confirm the row against Table 61 and Addendum B before using it in a hospital rate model.

Table 62: The 10 Algorithm-Only Laboratory Codes

Table 62 is a separate list: 10 HCPCS codes for SaMS analyses performed on laboratory tests that are currently payable under the CLFS.

CMS identified those 10 codes from the CPT descriptor: if the descriptor included no laboratory methods and described only an algorithmic analysis, CMS treated it as a SaMS laboratory analysis. The agency asks for comment on the list and on any similar analyses that should leave the CLFS for OPPS.

CMS proposes to assign those codes to New Technology APCs with status indicator O1. It used recent CLFS amounts to choose bands that closely approximate current CLFS payment, but "cannot be expected to align exactly" because New Technology APCs are cost bands, not test-specific fees. The official example is a code paid $430.17 under the CLFS mapping to APC 1506 at $450.50.

Critical Methodological Limitation & Data Warning: Do not simply add the 36 codes from Table 61 and the 10 codes from Table 62 into a single combined census of "46 OPPS codes" without auditing code-level overlap and hospital billing mechanics. Table 61 governs procedural and imaging software services; Table 62 governs the structural migration of algorithmic laboratory analyses. Furthermore, commercial teams must examine ADLT vs. CDLT: How a Single-Laboratory IVD Can Escape the 3-Year Cut Cycle to understand the profound revenue differences between fee schedule rates and OPPS APC midpoints.

Decision Matrix: Classifying Your Code Under CMS-1850-P

If your product / HCPCS code is:	Proposed CY 2027 OPPS result	Status indicator	Operational action
On Table 61, currently clinical APC / S	New Technology APC aligned with the CY 2026 rate	O1	Map the charge master to the proposed APC; confirm Addendum B.
On Table 61, already on a New Technology APC	Same New Technology APC	O1	Plan the S-to-O1 indicator change for January 1, 2027 if the final rule adopts it.
On Table 62 (currently CLFS)	New Technology APC under OPPS	O1	Model the APC midpoint, not the PAMA CLFS fee. Hospital outpatient billing would use the UB-04 / CMS-1450.
Designated SaMS but currently Q1, N, E1, or M	Keep current APC/indicator	Q1, N, E1, or M	Do not forecast separate O1 payment. Comment if you want a different assignment.
FDA-cleared/approved, but not on Table 61 or 62	Unchanged	Historical indicator	Comment by August 31, 2026 requesting addition or an explanation of the omission.
No dedicated CPT / HCPCS code	Unlisted (for example CPT 76499)	Typically packaged	Obtain a specific code through AMA CPT or CMS HCPCS; SaMS designation in this rule is a code-list exercise.

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What Does Status Indicator O1 Pay, and Why Is CMS Asking About a T-Like Discount Instead?

Under the Medicare OPPS, every HCPCS code billed by a hospital is assigned a Payment Status Indicator (SI) that dictates how the fiscal intermediary processes the line item.

The Proposed Definition of Status Indicator O1

CMS proposes to create status indicator O1, discussed in section X.B and defined in Table 63, with the complete CY 2027 indicator list in Addendum D1:

Status Indicator O1: Software as a Medical Service, paid under OPPS; separate APC payment.

CMS proposes that O1 have the same payment specifications as status indicator S, to allow separate APC payment. Status indicator S means the procedure or service is not discounted when multiple.

The S-versus-T comment

CMS asks for comment on that O1-as-S proposal, and separately asks whether a new indicator with the same specification as status indicator T (Procedure or service subject to multiple procedure discounting) would be more appropriate and would address program-integrity concerns.

Proposed O1 (match S)	Alternative CMS asks about (match T)
Separate APC payment.	Separate APC payment, but multiple-procedure discounting would apply.
S is not discounted when multiple, so two SaMS line items on one claim would each be paid in full under this primary proposal.	T currently discounts subsequent procedures on the same claim (OPPS historically applies a 50 percent reduction to the lower-ranked procedure). CMS did not specify a 50 percent SaMS formula in the request for comment.
Supports billing more than one designated algorithm on one encounter at full APC rates.	Would reduce payment when multiple SaMS codes share an encounter; CMS flags program-integrity concern, not a finalized discount.

CMS does not, in this request for comment, publish a list of "shared computational overhead" algorithms. If you sell a multi-algorithm suite, the comment file is where you would show distinct licensing, distinct clinical interpretation, or distinct resource use—or where a hospital would support discounting.

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If You Move from a Clinical APC, Does the CY 2026 Rate Survive the New Technology APC Reassignment?

For the 21 HCPCS codes moving from clinical APCs to New Technology APCs, the most urgent commercial question is rate continuity.

The New Technology APC Tier System

Unlike clinical APCs—which calculate payment from hospital claims cost data—New Technology APCs are fixed cost bands. Each level pays the midpoint of its band. Illustrative CY 2027 bands used in this proposed rule include:

New Technology APC	Cost band	Standardized midpoint
APC 1491 (Level 1A)	$0 – $10	$5.00
APC 1502 (Level 2)	$51 – $100	$75.50
APC 1506 (Level 6)	$401 – $500	$450.50
APC 1508 (Level 8)	$601 – $700	$650.50
APC 1510 (Level 10)	$801 – $900	$850.50
APC 1511 (Level 11)	$901 – $1,000	$950.50

Higher levels also exist (the same proposed rule assigns non-SaMS services to APCs such as 1520 and 1521). Confirm the code-level amount in Addendum B; do not treat this excerpt as a complete fee schedule.

Rate Continuity for the 21 Clinical-APC Reassignments

CMS proposes to pick New Technology APC bands that closely align with CY 2026 clinical-APC payment for the 21 reassigned codes. That is approximate continuity, not a statutory hold-harmless.

Already on a New Technology APC: Section 1833(t)(2)(E)

For SaMS already assigned to New Technology APCs for CY 2026, section III.C proposes to maintain the current APC assignments under section 1833(t)(2)(E), and not apply the usual universal low-volume methodology or claims-based geometric-mean reassignment, because CY 2027 is an interim SaMS policy.

That is a real protection against claims-driven cliffs, not a blanket freeze of every software-related New Technology APC in the OPPS. Two official SaMS examples:

• CPT 75577 (AI-QCT): remain on APC 1511 at $950.50, status indicator O1.
• CPT 0721T / 0722T (Optellum LCP): remain on APC 1508 at $650.50, status indicator O1. CMS notes that CY 2024 claims would have supported APC 1502 ($51–$100); the agency used 1833(t)(2)(E) in CY 2026 to avoid that drop and proposes to keep the same APC for CY 2027.

Confirm each code in Addendum B. Do not assume every low-volume imaging algorithm is frozen at APC 1508 or 1511.

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If You Are an Algorithm-Only Lab Analysis, Do You Leave the CLFS, and Does the Dollar Amount Stay the Same?

The proposed shift of 10 algorithmic laboratory codes from Table 62 off the Clinical Laboratory Fee Schedule onto OPPS New Technology APCs represents a seismic operational transition for diagnostic developers.

Why Algorithm-Only Analyses Are Proposed to Leave the CLFS

CMS identified the Table 62 codes from the CPT descriptor: no laboratory methods, only algorithmic analysis. The proposal is an OPPS assignment of those analyses, not a rewriting of PAMA private-payer reporting for wet-lab tests that remain on the CLFS.

The Dollar Amount Reality Check

New Technology APC payment is not a CLFS hold-harmless. CMS says it used recent CLFS data to choose bands that closely approximate current CLFS rates, but the APC amount will not match the CLFS fee exactly.

	Historical CLFS (CMS example)	Proposed OPPS New Technology APC
Example amount	$430.17	APC 1506 at $450.50 (band $401–$500)
Why they differ	Test-specific CLFS fee	Fixed APC cost band / midpoint
Hospital outpatient claim	Independent lab / CLFS claim form	UB-04 / CMS-1450 (bill type 13X) if paid under OPPS
Beneficiary cost-sharing	Clinical diagnostic laboratory tests on the CLFS generally have no Part B coinsurance	OPPS line items generally take standard Part B outpatient coinsurance (typically 20%), subject to the usual OPPS coinsurance rules

Do not model an 18–25 percent cut from invented CLFS fees. Open Table 62 and Addendum B for the specific code. The official example is a modest increase ($430.17 to $450.50), and other codes could move up or down depending on which band contains the current CLFS amount.

Operational Friction for Independent Laboratories

If a Table 62 code is paid under OPPS for a hospital outpatient, the hospital bills the OPPS line. Independent laboratories do not bill OPPS. They would need a client-bill or purchased-service arrangement with the ordering hospital for that setting. Setting-of-service splits (physician office versus HOPD versus independent lab) still matter; this proposed rule does not rewrite the Physician Fee Schedule.

For comprehensive strategies on navigating hospital contracting and health economics dossiers, review our operating manual on 2. How Does the VAC Evaluate a New Medical Device?.

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Should You Comment by August 31, 2026, File a New Code, or Wait for the November Final Rule?

With the comment deadline falling on August 31, 2026, manufacturers and specialty societies face an immediate decision tree.

Situation	What a comment can do by August 31, 2026	What a comment cannot do
On Table 61 or 62, and the proposed APC looks right	Support O1-as-S, and oppose a T-like alternative with multi-code resource evidence if that matters to you. Prepare charge-master mapping for January 1, 2027 if the final rule adopts the proposal.	Lock the November final rule or guarantee CY 2027 payment.
Code exists but is omitted, or is designated SaMS but kept as Q1/N/E1/M	Ask CMS to add the code or change the indicator, with FDA authorization, the code descriptor, and hospital cost evidence.	Treat FDA SaMD clearance as automatic O1.
No dedicated CPT / HCPCS code	You cannot obtain SaMS designation by comment alone. File for a Category III CPT or HCPCS Level II code.	Expect CY 2027 O1 for an unlisted code.

1. What Can Be Achieved by Commenting by August 31, 2026?

Filing a formal comment under docket CMS-2026-2344-0002 is the only timely way to influence this rule before the typical November final rule:

• APC band: If the proposed New Technology APC midpoint is below documented hospital acquisition cost, submit invoices and ask CMS to move the code to a higher band in the final rule. That is a comment request, not a guaranteed reassignment.
• Code inclusion: If you hold a specific Category III CPT or HCPCS code that is omitted, ask CMS to add it and explain why the descriptor is algorithmic clinical or diagnostic analysis.
• O1 versus T: Present workflow and licensing evidence if multiple designated algorithms appear on one claim.

To understand how procedural and diagnostic coding drives facility reimbursement, see our comprehensive guide on How Codes Drive Payment: The Medicare Payment Landscape.

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How Do SaMS, FDA SaMD, TPT Status H, NTAP, RPM/RTM, and Digital Therapeutics Differ?

A frequent point of confusion across digital health executive teams is conflating regulatory authorization with Medicare payment mechanisms. As highlighted in recent industry legal analyses by Wilson Sonsini and Reed Smith, CMS-1850-P establishes an outpatient payment policy, not a universal digital health reimbursement umbrella.

The following master comparison table delineates the distinct boundaries across US digital health and medical technology programs:

Program / Category	Regulatory / Statutory Authority	Payment Mechanism & Setting	Status Indicator / Code Type	Key Qualification Gate
Software as a Medical Service (SaMS)	CMS OPPS (CMS-1850-P / 42 CFR Part 419)	Separate New Technology APC in hospital outpatient if assigned O1	O1 when separately paid; some designated codes keep Q1/N/E1/M	Algorithmic clinical/diagnostic functionality and the proposed indicator/APC on Table 61, Table 62, or Addendum B.
Software as a Medical Device (SaMD)	FDA Premarket (FD&C Act § 510(k), De Novo, PMA)	Zero Payment Authority. Grants legal marketing authorization only.	N/A (FDA Product Code)	Safety, effectiveness, substantial equivalence; software intended for medical purposes. For core definitions, see What Is Software as a Medical Device?.
OPPS Transitional Pass-Through (TPT)	Social Security Act § 1833(t)(6); 42 CFR § 419.66	Incremental outpatient add-on above the APC for qualifying devices	Status Indicator H (HCPCS C-codes)	Implanted, inserted, or applied device meeting 419.66. Standalone algorithmic software typically cannot meet those device criteria. See Comparison Matrix: TPT vs. NTAP vs. Comprehensive APC.
Inpatient New Tech Add-on Payment (NTAP)	Social Security Act § 1886(d)(5)(K); 42 CFR § 412.87	Add-on payment (up to 65% of cost) above MS-DRG in Hospital Inpatient (IPPS)	Form CMS-1450 (IPPS Claim / ICD-10-PCS)	Inpatient technology; must meet Newness, Cost, and Substantial Clinical Improvement (SCI). See NTAP and the Broader Reimbursement Landscape and What CMS Has Proposed.
Remote Patient Monitoring (RPM / RTM)	CMS Physician Fee Schedule (PFS)	Professional fee-schedule payment for physiologic/therapeutic data collection	CPT 99453, 99454, 99457, 99458, 99445, 99470; 98975–98981	Connected-device monitoring billed under dedicated RPM/RTM CPT codes, including 2026 shorter-duration codes. Not OPPS SaMS. See CMS Reimbursement Framework: CPT Codes, Billing Requirements, and 2026 Changes.
Prescription Digital Therapeutics (PDTX / DMHT)	CMS PFS / HCPCS Level II	Separate technical/professional billing for digital mental health therapies	HCPCS G-Codes (G0552, G0553, G0554)	FDA-authorized software delivering behavioral/clinical therapy under physician direction. See Reimbursement Landscape.
CMS RAPID Coverage Pathway	CMS Proposed Coverage Policy (2026)	Accelerated Medicare Coverage Timing (60–90 days post-FDA) for Breakthrough devices	N/A (Coverage Determination, not a payment rate)	FDA Breakthrough Device designation; premarket authorization for designated indication. See What RAPID Does NOT Do.
CMS ACCESS Model	CMMI Innovation Center (Section 1115A)	Demonstration model testing alternative primary care and technology access models	Model-Specific Billing Rules	Voluntary health system participation in CMMI test regions. See The CMS ACCESS Model Connection.

Why SaMS Is NOT Device Pass-Through (TPT Status H)

Many digital health manufacturers look first at OPPS Transitional Pass-Through (TPT). Under 42 CFR § 419.66, TPT is a device-category add-on for items that are implanted, inserted, or applied and that meet the rest of that regulation. Standalone algorithms and cloud analysis services typically cannot meet those device criteria. Proposed status indicator O1 is the OPPS construct CMS created for designated algorithmic software that is separately paid; it is not a TPT C-code.

To review general digital health coverage frameworks, see our landscape analysis on Digital Health, Software, and AI Device Reimbursement.

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Does This OPPS Facility Payment Apply in ASCs, Physician Offices, Medicare Advantage, or Only HOPD Fee-for-Service?

Reimbursement eligibility is defined by site of service. Status indicator O1 is strictly an OPPS construct, leading to distinct treatment across care settings:

1. Hospital Outpatient Departments (HOPD)

• Applicability: Direct, if the final rule assigns the code to O1 (or another separately payable indicator).
• Billing Form: UB-04 (Form CMS-1450) with bill type 13X.
• Payment: The hospital receives the assigned New Technology APC national standardized rate, wage-index adjusted, when O1 (or the finalized separately payable indicator) applies.

2. Ambulatory Surgical Centers (ASC)

• Applicability: Conditional / Restricted.
• Mechanics: The ASC payment system is linked to OPPS but maintains an independent payment schedule and the ASC Covered Procedures List (CPL).
• If a surgical procedure is performed in an ASC and utilizes an algorithmic software tool, separate payment is available only if CMS explicitly assigns the SaMS code to the ASC fee schedule with separate payment status. Otherwise, the software cost is packaged into the ASC procedural facility fee.
• To examine ASC site-of-service shifts and commercialization strategies, see our in-depth report on What to Watch in 2027.

3. Physician Offices (Physician Fee Schedule - PFS)

• Applicability: Zero Direct Application.
• Mechanics: Services rendered in private physician offices are reimbursed under the Medicare Physician Fee Schedule (PFS) based on Relative Value Units (RVUs: Work RVU, Practice Expense RVU, Malpractice RVU).
• Status indicator O1 does not create a practice expense payment in the physician office. Office-based algorithmic software reimbursement is governed by separate PFS rulemaking (including the companion CY 2027 PFS proposed rule published on July 14, 2026).

4. Medicare Advantage (Part C Plans)

• Applicability: Contractual / Variable.
• Mechanics: Medicare Advantage plans are legally required to cover all basic Part B benefits. However, private MA payers are not bound by OPPS APC fee structures. Payers negotiate independent fee schedules, capitated rates, or require specialized prior authorization before covering algorithmic diagnostic software.

To contrast Medicare coverage policies with local contractor guidelines, see our analysis on Medicare NCD vs. LCD Coverage Determinations.

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What Does This Cost Beyond the APC Amount: Coding, Charge Master, and Internal Implementation versus Government Fees?

When evaluating the economic footprint of CMS-1850-P, market-access teams must separate official government regulatory fees from provider operational expenses and manufacturer commercialization investments.

Summary of Implementation Costs vs. Government Fees

Cost Category	Entity Incurring Cost	Amount / Basis	Official Source / Legal Status
CMS SaMS Designation Fee	Manufacturer	$0.00 / Free	No government fee exists; CMS designates existing codes via rulemaking.
CMS-1850-P Public Comment Filing	Stakeholder	$0.00 / Free	Free public submission via Regulations.gov.
FDA Premarket Review User Fees	Manufacturer	$28,653 standard 510(k) / $7,163 small-business 510(k) (official FY 2027 MDUFA)	FDA user-fee schedule (FD&C Act § 738). Independent of CMS OPPS. See the on-site FY 2027 MDUFA table.
AMA CPT Code Application	Manufacturer / Society	$0 government fee; internal legal/consulting cost is a typical operational estimate, not an AMA or CMS schedule	AMA CPT Editorial Panel process.
Hospital Charge Master (CDM) Setup	Hospital provider	Internal health-system IT and billing labor (varies; not a government fee)	Provider operational expense to map HCPCS, revenue codes, and the finalized indicator.
EHR & PACS Workflow Integration	Hospital / vendor	Implementation cost varies by contract; not a CMS fee	Technical integration. Treat any dollar range as a site-specific estimate.
HEOR & Value Dossier Development	Manufacturer	Internal or consulting cost; not a CMS fee	Health-economics modeling for hospital value analysis.
Hospital APC Facility Revenue	Hospital (received from Medicare)	Varies by assigned New Technology APC (this rule’s SaMS examples include $450.50, $650.50, and $950.50)	Standardized OPPS payment to the hospital, not a manufacturer invoice to CMS.

Crucial Financial Reality: The APC Is Hospital Revenue, Not a Vendor Invoice

A frequent commercial misconception is assuming that if CMS assigns a software code to New Technology APC 1508 ($650.50), Medicare will pay $650.50 directly to the software developer.

Medicare pays the hospital outpatient facility. The hospital collects the APC payment from Medicare Part B and the patient's coinsurance. The software developer must monetize its product through a commercial B2B arrangement with the hospital—such as a per-use fee, an annual subscription, or an enterprise license. Proposed O1, if finalized for that code, gives the hospital a separately payable facility line item; it does not set the vendor’s commercial price.

To evaluate official FDA premarket user fees and filing boundaries, consult our complete rate manual on Should We File Before September 30, 2026, or After October 1, 2026?.

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CMS-1850-P 30/60/90-Day Comment, Charge-Master, and Evidence Plan

To prepare for a January 1, 2027 effective date if the proposal is finalized, manufacturers and hospital commercial teams should execute this phased roadmap:

Window	Operational focus
Days 1–30 (August–September 2026)	File comments by August 31, 2026. Audit Table 61/62 and Addendum B. Model APC bands against hospital acquisition cost. Assemble O1-versus-T evidence if multiple SaMS codes share a claim.
Days 31–60 (October–November 2026)	When the CY 2027 OPPS final rule posts (typically early November), re-verify Table 61/62, O1 versus T, and Addendum D1. Refresh hospital VAC dossiers with finalized unadjusted APC amounts.
Days 61–90 (December 2026–January 2027)	Charge-master and billing go-live only for codes that the final rule actually assigns to O1. Monitor MAC bulletins. Do not bill O1 from the proposed rule.

Phase 1: Days 1–30 (August – September 2026) — Comment Window & Baseline Audit

• Submit Formal Comment: File public comments on Regulations.gov under docket CMS-2026-2344-0002 by August 31, 2026 (Federal Register DATES).
• Table 61 / 62 Verification: Cross-reference your product's CPT/HCPCS codes against Table 61 and Table 62, and note whether the proposed indicator is O1 or a retained Q1/N/E1/M assignment.
• Cost-to-Tier Mapping: If your code is proposed for a New Technology APC, verify that the midpoint is in the same neighborhood as hospital acquisition cost.
• Multi-Code Defense: If your technology is billed alongside complementary algorithms, compile clinical and licensing evidence on the O1-versus-T comment.

Phase 2: Days 31–60 (October – November 2026) — Final Rule Analysis & VAC Dossiers

• Inspect November Final Rule: Immediately upon publication of the CY 2027 OPPS Final Rule (CMS-1850-F), extract the finalized Table 61 and Table 62 lists and confirm finalized status indicator definitions in Addendum D1.
• Update Hospital VAC Dossiers: Refresh health economics and value analysis committee (VAC) materials with finalized national unadjusted APC payment amounts.
• Provider Engagement: Educate hospital radiology, cardiology, oncology, and laboratory department heads only for codes that are actually assigned O1 in the final rule.

Phase 3: Days 61–90 (December 2026 – January 2027) — Go-Live Activation

• Charge Master (CDM) Setup: Assist partner hospital billing departments in establishing internal charge codes linked to HCPCS codes and the finalized status indicator.
• Revenue Cycle Testing: Conduct end-to-end billing tests in hospital test environments for UB-04 claims that will use the finalized indicator.
• MAC Guidance Monitoring: Monitor local Medicare Administrative Contractor (MAC) billing bulletins and LCD updates for any site-specific documentation requirements.

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Frequently Asked Questions

Did CMS finalize Software as a Medical Service, or is this still a proposal?

CMS-1850-P is a proposed rule, not a finalized regulation. CMS issued it on July 2, 2026, published it on July 7, 2026 (91 FR 41734), and set comments to be received by August 31, 2026. The agency typically issues the CY 2027 OPPS final rule in early November. If adopted, the payment policies would apply beginning January 1, 2027.

If our software is FDA-cleared SaMD, are we automatically SaMS under OPPS?

No. FDA premarket clearance (510(k)), De Novo classification, or PMA approval determines that a medical device is safe and effective under the Food, Drug, and Cosmetic Act. FDA authorization does not grant Medicare reimbursement, does not assign a HCPCS code, and does not automatically place a product on Table 61 or Table 62. To receive proposed O1 payment, the service needs a specific HCPCS code that the final rule actually assigns to O1—not merely FDA SaMD authorization, and not merely appearing as a designated-but-packaged row.

Does status indicator O1 mean the hospital gets a separate APC payment, or is the software still packaged?

If the code is assigned O1, yes—separate APC payment is the point of that indicator. Proposed O1 is Software as a Medical Service, paid under OPPS; separate APC payment. Designation as SaMS is not enough: CMS also proposes to keep some designated codes as Q1, N, E1, or M. Confirm the finalized indicator in Addendum B / D1.

If we are on Table 62, will our Medicare payment still equal the current CLFS rate?

No. New Technology APC assignment uses cost bands, so the APC amount will not exactly match the current CLFS fee. CMS’s official example maps a $430.17 CLFS amount to APC 1506 at $450.50. OPPS line items generally take standard Part B outpatient coinsurance (typically 20%), unlike most CLFS clinical diagnostic laboratory tests.

Is OPPS device pass-through (TPT) the right path for algorithmic software?

Usually no for standalone software. Transitional Pass-Through under 42 CFR § 419.66 is a device-category add-on for items that are implanted, inserted, or applied and that meet the rest of that regulation. Standalone algorithms typically cannot meet those criteria. Proposed O1 is the OPPS construct for designated algorithmic software that is separately paid.

Do we need to file a CMS application to be designated as SaMS?

No. CMS is proposing to designate existing HCPCS codes in rulemaking. There is no SaMS application form or CMS filing fee. Table 61 (36 codes) and Table 62 (10 lab-analysis codes) are separate lists; do not add them into one census. To add an omitted code or change an APC band, file a public comment.

Does this proposal change physician-office payment under the Physician Fee Schedule?

No. Status indicator O1 and New Technology APCs apply exclusively to Hospital Outpatient Departments (HOPDs) under the OPPS. Physician-office billing is governed by the Medicare Physician Fee Schedule (PFS). Office-based software reimbursement requires dedicated CPT codes with established Work and Practice Expense Relative Value Units (RVUs).

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Recommended Reading

Medical Device Expanded Access: Emergency Use, Compassionate Use & Treatment IDE

Clinical Evidence Regulatory2026-08-24 · 29 min read

How Pure Global Supports US Market Access and Digital Health Reimbursement

Bringing innovative clinical AI, algorithmic diagnostics, and Software as a Medical Device (SaMD) to the US healthcare market requires a coordinated strategy bridging FDA regulatory clearance, CPT/HCPCS code acquisition, and CMS hospital outpatient reimbursement.

Pure Global provides end-to-end regulatory consulting and US market-access execution for global medical technology and digital health innovators.

Our dedicated digital health and reimbursement practices support clients through:

• US Market Access & Reimbursement Strategy: Navigating OPPS SaMS designation, New Technology APC mapping, and hospital value analysis positioning via our United States Market Access advisory practice.
• FDA Software & SaMD Premarket Approvals: Preparing 510(k), De Novo, and Pre-Submission dossiers for algorithmic software through our specialized Software as a Medical Device (SaMD) regulatory team.
• Coverage & Coding Execution: Aligning CPT Category I/III strategies, HCPCS Level II applications, and payer economics files for commercial launch.
• Hospital Value Analysis Dossiers: Compiling clinical evidence and health economic impact models for hospital procurement committees.

To audit your US coding, regulatory classification, and hospital reimbursement strategy, contact Pure Global.

Pure Global provides independent regulatory and US market-access project support. Pure Global is not the Centers for Medicare & Medicaid Services (CMS), the Food and Drug Administration (FDA), a Medicare Administrative Contractor (MAC), or a hospital system, and does not set statutory Medicare reimbursement rates.

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Sources

1. Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems (CMS-1850-P) — Centers for Medicare & Medicaid Services, 91 FR 41734, document 2026-13656 (issued July 2, 2026; published July 7, 2026).
2. Hospital Outpatient PPS Overview & CY 2027 Proposed Rule Notice — Centers for Medicare & Medicaid Services.
3. CMS-1850-P Regulations and Notices Hub — Centers for Medicare & Medicaid Services.
4. Calendar Year 2027 Hospital Outpatient Prospective Payment System (OPPS) Fact Sheet — CMS Newsroom.
5. CMS Proposes an Interim Payment Policy for Software as a Medical Service in Outpatient Rule — Reed Smith (July 2026).
6. What is Software as a Medical Service (SaMS) under the 2027 OPPS Proposed Rule? — Nixon Law Group (July 2026).
7. Health Reimbursement Signals: CMS Proposes Payment Frameworks for Software as a Medical Service — Wilson Sonsini Goodrich & Rosati (July 2026).
8. Medicare Hospital Outpatient Prospective Payment System CY 2027 Proposed Rule Summary — American Urological Association (AUA).
9. CMS signals intent to revamp how it pays for clinical software, AI — STAT News (July 16, 2026).
10. CMS OPPS Payment Status Indicators — Centers for Medicare & Medicaid Services.
11. Clinical Laboratory Fee Schedule (CLFS) & PAMA Regulations — Centers for Medicare & Medicaid Services.
12. FDA Medical Device User Fee Amendments (MDUFA) FY 2027 Rates — Food and Drug Administration.
13. 42 CFR Part 419 — Prospective Payment System for Hospital Outpatient Department Services — Electronic Code of Federal Regulations.