CMS Proposes Repealing NTAP Alternative Pathway for Breakthrough Devices: What the FY 2027 IPPS Rule Means for MedTech Commercialization
A complete guide to CMS's proposed repeal of the NTAP alternative pathway for FDA Breakthrough Devices, the new RAPID coverage program, implications for device commercialization, and what manufacturers should do now.
What Just Happened
On April 14, 2026, CMS published the FY 2027 Inpatient Prospective Payment System (IPPS) proposed rule in the Federal Register. Buried in its hundreds of pages is a proposal that would fundamentally reshape how FDA Breakthrough Devices qualify for Medicare's New Technology Add-On Payment (NTAP) program: CMS proposes to repeal the "alternative pathway" that allows Breakthrough-designated devices to receive NTAP without independently demonstrating substantial clinical improvement.
If finalized as part of the August 2026 final rule, the repeal would apply to NTAP applications beginning with the FY 2028 cycle (applications due October 2027, payments effective October 2028). CMS also proposed a parallel repeal of the alternative pathway for outpatient Transitional Pass-Through (TPT) payments, effective for applications received on or after October 1, 2026.
The proposal does not exist in a vacuum. Nine days after the IPPS proposed rule's display date, CMS and FDA jointly announced the Regulatory Alignment for Predictable and Immediate Device (RAPID) coverage pathway on April 23, 2026, a separate initiative aimed at accelerating Medicare coverage decisions for Breakthrough Devices. Together, these two developments represent the most significant shift in Medicare's approach to breakthrough medical technology reimbursement in over a decade.
This guide provides a comprehensive analysis of what CMS has proposed, why it matters, how we got here, what the data show about the alternative pathway's track record, how the RAPID program fits into the picture, and what medical device manufacturers should do right now.
NTAP in Brief: The Program Being Changed
Before analyzing the proposed repeal, it is worth restating what NTAP is and why it matters to device commercialization.
The New Technology Add-On Payment program, established under Sections 1886(d)(5)(K) and (L) of the Social Security Act, provides incremental Medicare payment to hospitals above the standard MS-DRG rate when they use qualifying new, costly technologies during inpatient stays. Without NTAP, hospitals face a financial disincentive to adopt new technologies whose costs exceed the fixed DRG payment. The program lasts up to three years per technology per indication.
For FY 2026, NTAP pays the lesser of 65% of the new technology's cost or 65% of the amount by which the case cost exceeds the MS-DRG payment. For qualifying infectious disease products (QIDP) and Limited Population Approval Pathway (LPAD) products, the rate is 75%.
Under the traditional NTAP pathway, a technology must satisfy all three criteria:
- Newness -- The technology must not be substantially similar to products already on the market for more than two to three years.
- Cost -- The technology must be costly enough that the applicable MS-DRG payment is inadequate.
- Substantial Clinical Improvement (SCI) -- The technology must demonstrate a substantial clinical improvement over existing technologies or services.
The third criterion, substantial clinical improvement, has historically been the highest bar and the most common reason for NTAP denial.
The Alternative Pathway: How It Worked and Why It Was Created
Origin
CMS created the alternative NTAP pathway in the FY 2020 IPPS Final Rule and expanded it in FY 2021. The logic was straightforward: FDA's Breakthrough Device designation already requires a finding that the device offers significant advantages over existing technologies for life-threatening or irreversibly debilitating conditions. If FDA has already made that determination through a rigorous process, CMS reasoned, there should be no need for a redundant, independent SCI evaluation.
Under the alternative pathway, FDA-designated Breakthrough Devices (and QIDP/LPAD products) were deemed to have already satisfied the newness and substantial clinical improvement criteria. The manufacturer only needed to demonstrate the cost criterion. This dramatically simplified the NTAP application process.
The Data Tell a Clear Story
The alternative pathway was not a marginal feature. It became the dominant route by which medical devices obtained NTAP:
| Metric | Alternative (BTD) | Traditional |
|---|---|---|
| Share of device applications in FY 2027 proposed rule | 76% | 24% |
| Share of successful NTAP awards (FY 2021-2026) | 91% | 9% |
| Application success rate | 66% | 20% |
| Traditional pathway record (FY 2024-2026) | N/A | 0 for 9 |
These numbers are striking. From FY 2021 through FY 2026, 91% of all successful NTAP awards for devices came through the Breakthrough alternative pathway. Breakthrough applications succeeded at a rate of 66%, compared to just 20% for traditional pathway applications. And from FY 2024 through FY 2026, traditional pathway device applications went zero for nine -- not a single one was approved.
The implication is clear: for most medical device manufacturers pursuing NTAP, the alternative pathway was not a convenience. It was the only viable path. Without it, the vast majority of device NTAP applications would have failed.
What CMS Has Proposed
The Core Proposal
In the FY 2027 IPPS proposed rule, CMS proposes to repeal the alternative NTAP pathway for Breakthrough Devices. If finalized:
- All NTAP applicants would need to independently demonstrate all three criteria -- newness, cost, and substantial clinical improvement -- regardless of FDA Breakthrough Device designation.
- FDA Breakthrough Device designation would no longer serve as a proxy for the newness and SCI criteria.
- The change would apply to FY 2028 NTAP applications and beyond, meaning applications due in October 2027 for payments beginning October 2028.
- QIDP and LPAD alternative pathways would remain unchanged -- the proposal targets only the Breakthrough Device pathway.
The Parallel OPPS Proposal
CMS also proposed to repeal the alternative TPT pathway for Breakthrough Devices in the outpatient setting. Specifically:
- Applications for outpatient device pass-through payments received on or after October 1, 2026 would need to demonstrate substantial clinical improvement through the traditional pathway.
- Applications submitted before October 1, 2026 could still use the alternative pathway.
- Existing device category codes with pass-through status would continue for their standard two- to three-year duration.
Grandfathering Provisions
CMS has stated that the following would not be affected by the repeal:
- Technologies already receiving NTAP would continue to receive payments through their remaining eligibility period.
- Applications currently under review (FY 2027 cycle) could still use the alternative pathway.
- OPPS pass-through applications submitted by September 30, 2026 would be reviewed under the alternative pathway rules.
CMS's Stated Rationale
CMS's justification for the repeal is rooted in its assessment that the alternative pathway's evidence standards are insufficient. In the proposed rule, CMS states it has developed "concerns about the limited evaluation process" for the alternative pathway and believes that all technologies should be required to demonstrate substantial clinical improvement through CMS's own evaluation framework.
CMS argues that the repeal would "better position the agency to make evidence-based decisions" by ensuring that the SCI determination is made using CMS's established totality-of-the-circumstances framework rather than relying on FDA's Breakthrough Device designation as a surrogate.
This reasoning reflects a philosophical disagreement between CMS and FDA about what constitutes sufficient evidence of clinical improvement. FDA's Breakthrough Device Program evaluates whether a device offers significant advantages within the context of the device's intended use and the severity of the condition it addresses. CMS's SCI framework is explicitly comparative -- it asks whether a technology improves outcomes relative to technologies currently available, evaluated through CMS's own lens of mortality, complications, healthcare utilization, functional outcomes, and changes in clinical management.
The practical consequence is that CMS wants to apply its own evaluative standard rather than deferring to FDA's.
The RAPID Program: A Separate but Related Development
What RAPID Is
On April 23, 2026, CMS and FDA jointly announced the Regulatory Alignment for Predictable and Immediate Device (RAPID) coverage pathway. RAPID is a separate initiative from the NTAP repeal, but the timing of the two announcements -- nine days apart -- has led many in the industry to view them as complementary parts of a broader CMS strategy.
RAPID aims to compress the gap between FDA market authorization and Medicare national coverage from a year or more to as little as 60 to 90 days for eligible Class II and Class III Breakthrough Devices. It does this by aligning FDA and CMS evidence expectations during the IDE study stage, so that by the time a device receives FDA authorization, CMS has already reviewed the evidence and is prepared to issue a proposed National Coverage Determination on the same day.
RAPID Eligibility
| Requirement | Details |
|---|---|
| FDA Breakthrough Designation | Must have active designation from CDRH |
| Device Class | Class III (any), or Class II participating in the TAP program |
| Unmet Medical Need | Must address unmet needs among Medicare beneficiaries |
| IDE Study | Must be studied under an Investigational Device Exemption |
| Medicare Enrollment | The IDE study must enroll Medicare beneficiaries |
| Agreed Outcomes | Clinical health outcomes must be agreed upon by both FDA and CMS |
What RAPID Does and Does Not Do
RAPID addresses coverage -- whether Medicare will pay for a device at all. It does not directly address payment adequacy -- how much Medicare will pay. A device can have national coverage but still face inadequate payment if the MS-DRG rate does not reflect the cost of the new technology. That is precisely what NTAP is designed to address.
This distinction is critical for understanding the dual announcements. RAPID may get Breakthrough Devices covered faster, but repealing the NTAP alternative pathway makes it harder for those same devices to receive adequate inpatient payment during the critical early adoption period.
As Lee Fleisher and other experts have noted, coverage without adequate reimbursement does not drive hospital adoption. Hospitals need both.
Industry Reaction
The proposed repeal has generated significant concern across the medical device industry, even as the RAPID program has been broadly welcomed.
AdvaMed
AdvaMed, the largest medical device industry trade association, expressed concern about the NTAP repeal while supporting RAPID. The organization has emphasized that the alternative pathway was working as intended and that its elimination would create new barriers to hospital adoption of breakthrough technologies.
Legal and Consulting Advisory Firms
Multiple major law firms and consultancies have issued client advisories on the proposal, including Latham & Watkins, Ropes & Gray, McDermott+, and Holland & Knight. These advisories have generally highlighted the significance of the proposed change and urged clients to submit comments before the June 9, 2026 deadline.
Industry Commentary
Prana Surgical characterized the policy shift succinctly: "the old bargain was about launch economics." The observation captures a key tension -- the alternative pathway was part of a broader policy framework that encouraged innovation by reducing reimbursement barriers for breakthrough technologies. Removing one leg of that framework changes the calculus for manufacturers making investment and launch decisions.
Timeline and Key Dates
| Date | Event |
|---|---|
| April 10, 2026 | FY 2027 IPPS proposed rule displayed (pre-publication) |
| April 14, 2026 | FY 2027 IPPS proposed rule published in Federal Register |
| April 23, 2026 | CMS-FDA RAPID coverage pathway announced |
| June 9, 2026 | Public comment deadline on FY 2027 IPPS proposed rule |
| August 1, 2026 | Expected FY 2027 IPPS final rule publication |
| October 1, 2026 | FY 2027 begins; OPPS alternative pathway closes for new applications |
| October 2027 | FY 2028 NTAP applications due (first cycle affected by repeal if finalized) |
| October 1, 2028 | FY 2028 begins (first fiscal year under traditional-only NTAP pathway, if finalized) |
Comment Period
The public comment period on the FY 2027 IPPS proposed rule closes on June 9, 2026. This is the primary opportunity for manufacturers, industry associations, patient groups, and other stakeholders to weigh in on the proposed repeal. CMS is required to review and respond to substantive comments before issuing the final rule.
Final Rule
The final rule is expected on or around August 1, 2026, consistent with the statutory deadline. CMS could finalize the proposal as written, modify it in response to comments, or withdraw it entirely. Each of these outcomes is possible, and manufacturers should prepare contingency plans for each scenario.
What This Means for Device Manufacturers
The SCI Problem Is Now Your Problem
The most immediate consequence of the proposed repeal is that Breakthrough Device manufacturers can no longer assume CMS will accept their device's clinical benefits as self-evident. Under the alternative pathway, the SCI demonstration was waived. Under the traditional pathway, it is the single hardest criterion to meet -- and the most common reason for NTAP denial.
This means that manufacturers must now build a robust, CMS-specific SCI evidence package, even for devices that FDA has designated as breakthrough. CMS's SCI framework evaluates mortality reduction, complication reduction, healthcare utilization improvement, functional outcomes, and changes in clinical management. The evidence must be comparative -- showing improvement relative to existing technologies -- and it must be presented in a format that CMS's reviewers find persuasive.
The Clinical Evidence Gap
For many Breakthrough Device manufacturers, this creates a significant evidence gap. FDA's Breakthrough Device Program does not require the same type of comparative effectiveness evidence that CMS's SCI evaluation demands. FDA may designate a device as breakthrough based on preliminary clinical data, mechanistic rationale, and surrogate endpoints. CMS's SCI evaluation asks whether the device produces meaningful clinical improvements compared to the current standard of care in real-world practice.
Closing this gap requires deliberate planning. Clinical development programs must be designed to generate evidence that satisfies both FDA's safety and effectiveness requirements and CMS's comparative effectiveness expectations. This may mean larger studies, longer follow-up, different endpoints, or additional analyses -- all of which increase development costs and timelines.
The Commercialization Calculus
The NTAP alternative pathway was a significant factor in the commercialization strategy for Breakthrough Devices. Manufacturers could plan product launches knowing that if they obtained FDA authorization and Breakthrough designation, they had a reasonable expectation of receiving NTAP to support hospital adoption. The 66% success rate for alternative pathway applications made this a predictable part of the launch plan.
Under the traditional pathway, with its 20% success rate (and 0% success rate over the last three years), NTAP can no longer be assumed in commercialization planning. Manufacturers must model scenarios both with and without NTAP, and they must develop alternative strategies for ensuring hospital adoption if NTAP is not obtained.
This is particularly consequential for startups and smaller companies that lack the financial reserves to absorb delayed adoption. A three-year NTAP window can be the difference between reaching profitability and running out of capital.
Interaction with RAPID
Manufacturers should not assume that the RAPID program compensates for the loss of the NTAP alternative pathway. The two programs address different problems:
- RAPID addresses whether Medicare will cover a device (coverage).
- NTAP addresses whether hospitals will be paid enough to use it (payment adequacy).
A device that receives rapid national coverage through RAPID but cannot obtain NTAP because it fails the SCI criterion faces the same adoption barrier as before: hospitals will not purchase a device they cannot afford to use. RAPID without NTAP is coverage without the financial infrastructure to support adoption.
That said, RAPID's evidence alignment requirements could indirectly help with NTAP. If a manufacturer designs its IDE study to satisfy both FDA and CMS evidence expectations under RAPID, the resulting clinical data may be stronger for CMS's SCI evaluation than data generated solely for FDA purposes. This is speculative, but it suggests that RAPID-aligned evidence generation could partially offset the loss of the alternative pathway's SCI waiver.
What Manufacturers Should Do Now
Before June 9, 2026: Submit Comments
The comment period is open and the deadline is June 9, 2026. Manufacturers with Breakthrough-designated devices, or those planning to seek Breakthrough designation, should submit detailed comments to CMS addressing:
- The operational impact of the repeal on specific devices and patient populations
- Evidence that the alternative pathway was producing appropriate NTAP awards
- The interaction between the NTAP repeal and the RAPID program
- The potential chilling effect on innovation and investment in breakthrough technologies
- Specific data or case studies illustrating the consequences of repeal
Comments should be submitted through the Federal Register portal and should reference CMS-1810-P, the proposed rule's identifier.
For Devices in the FY 2027 NTAP Cycle
FY 2027 applications (submitted October 2025) are not affected by the proposed repeal. These applications will be reviewed under the alternative pathway rules currently in effect. Manufacturers with applications in this cycle should:
- Focus on ensuring FDA marketing authorization is obtained by the May 1, 2026 deadline
- Prepare for the Town Hall presentation and public comment process
- Submit comment letters addressing any CMS concerns about the application
For Devices Planning FY 2028 NTAP Applications
The FY 2028 cycle (applications due October 2027) would be the first affected by the repeal if finalized. Manufacturers planning for this cycle should immediately begin:
Build a standalone SCI evidence package. Do not assume that Breakthrough designation will satisfy CMS. Develop a comprehensive comparative effectiveness analysis addressing each of CMS's SCI dimensions: mortality, complications, healthcare utilization, functional outcomes, and clinical management changes.
Audit clinical development programs. Evaluate whether ongoing or planned clinical studies will generate the type of evidence CMS requires for SCI. If not, consider protocol amendments to capture CMS-relevant endpoints.
Engage CMS early. Use informal channels -- including the pre-submission process and the RAPID pathway's CMS-FDA joint engagement mechanism -- to understand CMS's evidentiary expectations for your device category.
Develop a newness analysis. Under the traditional pathway, CMS will also evaluate whether your device is substantially similar to existing products. Prepare a detailed analysis distinguishing your technology from predicate or competitor devices on mechanism of action, DRG assignment, and patient population.
Model the financial impact. Run scenario analyses with and without NTAP. If NTAP is denied, how does this affect hospital adoption rates, pricing strategy, and revenue projections? Develop contingency plans for alternative payment mechanisms (e.g., outlier payments, new DRG assignment, CPT coding strategy).
Consider RAPID pathway enrollment. If your device is a Class III Breakthrough Device (or Class II with TAP participation) and an IDE study is planned, RAPID could align your evidence generation with CMS expectations. The evidence generated through RAPID's aligned review process may strengthen your NTAP SCI demonstration.
For Companies Considering Breakthrough Device Designation
The proposed repeal reduces, but does not eliminate, the reimbursement value of Breakthrough Device designation. Breakthrough designation still provides:
- FDA priority review and interactive communication
- Senior management engagement at FDA
- Potential access to the RAPID coverage pathway
- A signal to investors and payers of the device's innovative nature
However, it would no longer provide a streamlined path to NTAP. Companies evaluating whether to pursue Breakthrough designation should weigh these remaining benefits against the costs of the designation process and factor in the increased uncertainty around NTAP.
The Broader Policy Context
Two Agencies, Two Questions
The tension at the heart of this proposal reflects a fundamental structural feature of the US medical device regulatory and reimbursement system: FDA and CMS ask different questions. FDA asks whether a device is safe and effective. CMS asks whether it is reasonable and necessary. These are overlapping but not identical standards, and a device can satisfy one without satisfying the other.
The alternative NTAP pathway was an attempt to bridge this gap -- to say that FDA's Breakthrough Device designation was rigorous enough to serve as a proxy for CMS's SCI determination. CMS's proposed repeal represents a retreat from that position.
The Innovation Policy Question
There is a legitimate policy debate here. On one side, requiring all technologies to demonstrate SCI through CMS's own evaluation ensures that Medicare only pays premiums for technologies with independently verified clinical benefits. On the other side, the alternative pathway was created precisely because CMS's SCI standard was (and remains) extremely difficult to meet, and the data show that the traditional pathway has essentially stopped working for device manufacturers.
The 0-for-9 record of traditional pathway device applications from FY 2024 through FY 2026 is not evidence that no new devices offered clinical improvement during that period. It is evidence that CMS's SCI standard, as applied, is effectively unattainable for most device applicants. Repealing the alternative pathway without reforming the SCI evaluation process may simply mean that fewer new devices receive NTAP -- which may mean slower hospital adoption, which may mean fewer patients benefit from technological advances.
The RAPID Offset
CMS and FDA appear to view RAPID as at least a partial offset to the NTAP repeal. The theory is that if Breakthrough Devices can obtain rapid national coverage through RAPID, the loss of streamlined NTAP is less damaging because coverage is the more fundamental barrier. This theory has merit for devices that are not dramatically more expensive than existing technologies. But for genuinely costly breakthrough technologies -- precisely the ones NTAP was designed to support -- coverage without adequate payment is insufficient.
Frequently Asked Questions
Does the proposal affect existing NTAP recipients?
No. Technologies already receiving NTAP would continue to receive payments through their remaining eligibility period. The proposal only affects future applications.
Does the proposal affect QIDP or LPAD products?
No. The alternative pathways for Qualified Infectious Disease Products and Limited Population Approval Pathway products are not affected. They would continue to use the alternative pathway requiring only the cost criterion.
What happens if CMS does not finalize the proposal?
If CMS withdraws the proposal in the final rule, the alternative pathway would continue unchanged. Manufacturers should monitor the August 2026 final rule.
Is the RAPID program affected by this proposal?
No. RAPID is a separate initiative with its own procedural notice and comment process. The NTAP repeal proposal and RAPID are independent policy actions.
Can a device still receive NTAP after the repeal?
Yes, but only through the traditional pathway, which requires independently demonstrating all three criteria: newness, cost, and substantial clinical improvement. The historical success rate for device applications through the traditional pathway is 20%, and from FY 2024 through FY 2026 it was 0%.
When would the repeal take effect for NTAP?
If finalized, the repeal would apply to FY 2028 NTAP applications, which are due in October 2027, with payments beginning October 2028.
When would the repeal take effect for outpatient pass-through?
For OPPS device pass-through payments, the repeal would apply to applications received on or after October 1, 2026. Applications submitted before that date could still use the alternative pathway.
Key Takeaways
- CMS has proposed repealing the NTAP alternative pathway for Breakthrough Devices, requiring all future applicants to demonstrate substantial clinical improvement through CMS's own evaluation framework.
- The alternative pathway has been responsible for 91% of successful device NTAP awards since FY 2021. Without it, most device manufacturers face a steep uphill battle for NTAP.
- The proposal also repeals the alternative outpatient pass-through pathway for applications received on or after October 1, 2026.
- The RAPID coverage pathway, announced nine days after the IPPS proposed rule, addresses coverage speed but does not solve the payment adequacy problem that NTAP addresses.
- Comments are due June 9, 2026. The final rule is expected August 1, 2026.
- Manufacturers should immediately begin building CMS-specific SCI evidence packages, auditing clinical programs, engaging CMS through RAPID and other channels, and modeling the financial impact of NTAP denial on their commercialization plans.
Sources: CMS FY 2027 IPPS Proposed Rule (Federal Register, April 14, 2026); CMS-FDA RAPID Press Release (April 23, 2026); AdvaMed public statements; Latham & Watkins client advisory; Ropes & Gray client alert; McDermott+ analysis; Holland & Knight advisory; Prana Surgical analysis; CMS NTAP application data (FY 2021-2026).