Medicare OPPS Device Pass-Through: CY2026 Categories and Criteria

A guide to Medicare OPPS transitional pass-through device payments, covering CY2026 categories, 42 CFR 419.66 criteria, and the FDA Breakthrough pathway.

Introduction: Outpatient Device Reimbursement and the Capital Gap

For medical device and in vitro diagnostic (IVD) manufacturers, securing FDA clearance or approval is only the first step in commercialization. The ultimate gatekeeper to market adoption is reimbursement. When a hospital outpatient department (HOPD) or ambulatory surgery center (ASC) evaluates a new device, its chief financial officer and billing teams ask a critical operational question: Will the Medicare payment cover the cost of this technology?

Under the Medicare Hospital Outpatient Prospective Payment System (OPPS), CMS pays facilities a predetermined, flat rate for clinical procedures. These procedures are grouped into Ambulatory Payment Classifications (APCs). The cost of all devices, supplies, and clinical labor utilized in a procedure is typically packaged (bundled) into a single APC rate. For novel, high-cost medical devices, this packaging model creates an economic gap: the cost of the new device alone can exceed the entire payment weight for the APC, forcing hospitals to lose money on every procedure. This dynamic halts adoption, regardless of the device's clinical benefits.

To prevent this "reimbursement gap" from blocking patient access to new technology, Congress established the Transitional Pass-Through (TPT) Payment mechanism. Codified under Section 1833(t)(6) of the Social Security Act and regulated under eCFR 42 CFR § 419.66, TPT payments provide hospitals and ASCs with incremental, add-on payments for qualifying new medical devices for a transitional period of 2 to 3 years. This payment bridge allows the hospital to recover the cost of the device while CMS collects the claims data required to eventually adjust the permanent APC rate.

This guide provides a comprehensive manual on Medicare OPPS transitional pass-through device payments. It dissects the statutory criteria under 42 CFR § 419.66, details the CY2026 financial and category updates established in the CMS-1805-F final rule, analyzes the FDA Breakthrough-device alternative pathway, contrasts outpatient pass-through with inpatient NTAP, and outlines the step-by-step application process for manufacturers.

Statutory & Regulatory Basis: Section 1833(t)(6) and 42 CFR § 419.66

The transitional pass-through payment program is built on a specific statutory and regulatory foundation.

Section 1833(t)(6) of the Social Security Act requires the Secretary of Health and Human Services to provide additional payments for a period of 2 to 3 years for new, high-cost medical devices, drugs, and biologicals. The statute sets a hard cap on the total amount of pass-through payments that CMS can make in a given calendar year: 2.0% of the total projected payments under the OPPS. If CMS projects that TPT spending will exceed this 2% cap, it must implement a uniform pro rata reduction across all pass-through payments. However, in the program's history, spending has remained well below the cap.

42 CFR § 419.66: Device Qualification Regulations

The regulatory rules governing whether a medical device qualifies for TPT payments are codified in the eCFR under 42 CFR § 419.66. Under this section, CMS does not approve individual device brands for pass-through payments; instead, it establishes categories of devices. To qualify for pass-through payments, a device must fit into an active category, or the manufacturer must apply to CMS to establish a new category.

Under 42 CFR § 419.66(b), a device category is eligible for pass-through payment if it meets the following structural requirements:

FDA Authorization: The device must have received FDA premarket clearance under Section 510(k), premarket approval (PMA) under Section 515, De Novo classification, or Humanitarian Device Exemption (HDE) approval.
Single-Use Limitation: The device must be integral to the service, used for one patient only, and meet the definition of a single-use device.
Surgical Implant/Insert: The device must be surgically implanted or inserted into a patient, or must be a single-use device that remains in contact with the patient (such as a specialized guidewire or catheter).
Not Capital Equipment: The device cannot be capital equipment or an instrument that is reused across multiple patients, even if it has a disposable component.

The Three Eligibility Criteria for Establishing a New Category

When a manufacturer applies for a new TPT category, CMS evaluates the application against three strict criteria codified in 42 CFR § 419.66(c):

[TPT Application Submitted]
             │
             ▼
[Verify 42 CFR 419.66(c) Criteria]
             │
             ├─► Criterion 1: Device-Category (Newness) ──► Is it described by an existing C-code?
             ├─► Criterion 2: Clinical Improvement      ──► Does it improve clinical outcomes?
             └─► Criterion 3: Cost Threshold            ──► Does device cost meet the 3-part math?
             ▼
[CMS Determination: Annual Rule or Quarterly C-code Update]

Criterion 1: The Device-Category (Newness) Criterion (42 CFR § 419.66(c)(1))

The device must be new, and its clinical function and characteristics must be distinct from any existing TPT categories or standard APC descriptions. If a device can be billed under a generic, existing HCPCS C-code (such as a generic "C1713 - Anchor, drug-eluting") or if its cost is already integrated into the baseline data of an existing APC, CMS will deny the application. The newness window is typically defined as within 3 years of the device's initial commercial launch.

Criterion 2: The Substantial Clinical Improvement Criterion (42 CFR § 419.66(c)(2))

The sponsor must demonstrate, through peer-reviewed clinical evidence, that the device offers a substantial clinical improvement compared to currently available alternatives.

The Evidentiary Bar: The sponsor must provide data from randomized controlled trials (RCTs), prospective studies, or multi-center registries showing that the device:
- Reduces mortality or morbidity.
- Reduces hospitalizations or emergency department visits.
- Improves patient recovery rates or quality of life.
The Challenge: Retrospective or single-center studies are rarely accepted. The clinical evidence must be robust and directly compare the new technology to the existing clinical alternatives.

Criterion 3: The Cost Criterion (42 CFR § 419.66(c)(3) and (d))

The device must meet a strict, three-part mathematical cost threshold — set out in 42 CFR § 419.66(d) and cross-referenced by (c)(3) — to prove that its cost cannot be absorbed by the existing APC rate:

Threshold 1 (Device Cost vs APC Payment): The estimated cost of the device must exceed 25% of the APC payment amount associated with the procedure.
Threshold 2 (Device Cost vs Procedure Cost): The estimated cost of the device must exceed the device-related portion of the APC payment by at least 25%.
Threshold 3 (The Net Cost Threshold): The estimated cost of the device must exceed the device-related portion of the APC payment by at least 10% of the total APC payment amount.

The Cost-Threshold Formula

$$\text{Device Cost} > \text{Baseline APC Payment} \times 0.25$$ $$\text{Device Cost} - \text{Device APC Offset} > (\text{Device APC Offset} \times 0.25)$$ $$\text{Device Cost} - \text{Device APC Offset} > (\text{Baseline APC Payment} \times 0.10)$$

If the device's manufacturing costs and average selling price (ASP) do not satisfy all three prongs of this formula, CMS will determine that the device's cost is "not substantial" and deny the pass-through status.

CY2026 Financial & Spending Overview: CMS-1805-F Final Rule

On November 25, 2025, CMS published the Calendar Year (CY) 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Final Rule (CMS-1805-F, 90 FR 53634). This final rule established the regulatory framework, payment weights, and TPT category determinations for the year.

CY2026 TPT Spending Projections

For CY2026, CMS projected the following financial metrics for the transitional pass-through program:

Total OPPS Payments: CMS projected total payments to OPPS providers at approximately $101.0 billion (an increase of $8.0 billion from CY2025).
Total Pass-Through Spending Estimate: CMS estimated total pass-through payments for drugs, biologicals, and devices at $307.0 million.
Device-Specific Pass-Through Estimate: Approximately $291.8 million is allocated specifically for medical devices. This is split between:
- $251.9 million for continuing, active device categories.
- $39.9 million for newly eligible device categories.
Drug & Biological Pass-Through Estimate: Approximately $15.2 million is allocated for drugs and biologicals.
Percentage of Total OPPS Spend: The estimated device pass-through spending represents 0.30% of total OPPS spending. This remains well below the 2.0% statutory cap ($2.02 billion limit), ensuring that no pro rata reductions will be applied to device add-on payments in CY2026.

CMS Status Indicators

To manage billing and payments under the OPPS, CMS assigns specific Status Indicators (SIs) to every HCPCS code. For device and reimbursement teams, the key SIs are:

Status Indicator	Definition	Payment Policy under OPPS
H	Pass-Through Device Category	Paid under a separate, transitional add-on payment. Excluded from procedural packaging and bundle calculations.
G	Pass-Through Drug or Biological	Paid separately under the OPPS (typically at Average Sales Price + 6%).
H1	Non-Opioid Pain Relief Devices	Special category for devices that manage post-surgical pain; paid separately to incentivize opioid reduction.
J1	Hospital Outpatient Comprehensive APC	All covered outpatient services, devices, and supplies are packaged into a single, comprehensive procedure payment.

CY2026 Active Device Pass-Through Categories

As of the CY2026 final rule (CMS-1805-F) and subsequent quarterly transmittals (such as MM14380 effective April 1, 2026), there are 20 active device pass-through categories eligible for add-on payments.

The table below lists a representative sample of these active categories, with HCPCS codes, official CMS long descriptors, effective dates, and pass-through expiration dates compiled from the CMS-1805-F final rule (Table 99) and the April 2026 quarterly update (MM14380).

Selected CY2026 Device Pass-Through Categories

HCPCS C-Code	Category Descriptor (CMS long descriptor)	Effective Date	Expiration Date	Status Indicator
C1742	Pressure monitoring system, compartmental intramuscular (implantable), continuous	Oct 1, 2025	Sept 30, 2028	H
C1741	Anchor/screw for bone fixation, absorbable (implantable)	Oct 1, 2025	Sept 30, 2028	H
C1740	Leadless electrode, transmitter, battery (all implantable), for sequential left ventricular pacing	Oct 1, 2025	Sept 30, 2028	H
C1743	Scaffold, endovascular non-coronary, resorbable drug-eluting, with delivery system (implantable) (added via MM14380)	Apr 1, 2026	Mar 31, 2029	H
C8000	Support device, extravascular, for arteriovenous fistula (implantable) (VasQ)	Oct 1, 2024	Sept 30, 2027	H
C1739	Tissue marker, probe detectable any method (implantable), with delivery system	Jan 1, 2025	Dec 31, 2027	H

Note: The 20 active categories listed in Table 99 of CMS-1805-F also include single-use endoscopes, renal denervation catheters, sacroiliac joint fusion devices, and leadless pacemaker components, among others. Under eCFR 42 CFR 419.66, a category is active for at least 2 years but no more than 3 years. Once a category expires, the C-code is deactivated, and the cost of the device is packaged into the associated procedural APC.

The Breakthrough Device Alternative Pathway: CY2026 Outcomes

A major regulatory incentive for medical device companies is the FDA Breakthrough Device Alternative Pathway. Established by CMS in the CY2020 rulemaking, this alternative pathway simplifies the TPT application process for devices that hold FDA Breakthrough Designation.

[FDA Breakthrough Device Designation]
                  │
                  ▼
[Submit OPPS TPT Application]
                  │
                  ├─► Category Criterion (42 CFR 419.66(c)(1))  ──► MUST MEET
                  ├─► Cost Criterion (42 CFR 419.66(c)(3))      ──► MUST MEET
                  └─► Clinical Improvement (419.66(c)(2))       ──► EXEMPT
                  ▼
[Accelerated Approval for Transitional Pass-Through Payment]

The Clinical-Evidence Exemption

Under the alternative pathway, an FDA Breakthrough Device is exempt from the "substantial clinical improvement" criterion (42 CFR § 419.66(c)(2)). CMS presumes that because the FDA has designated the technology as a Breakthrough Device (meaning it addresses an unmet medical need and offers a major clinical advantage), the clinical improvement bar is met.

However, the Breakthrough Device must still satisfy the remaining two criteria:

It must meet the newness/category criterion (42 CFR § 419.66(c)(1)).
It must meet the mathematical cost thresholds (42 CFR § 419.66(c)(3)).

CY2026 Application Outcomes

In the CY2026 final rule (CMS-1805-F), CMS acted on eight device pass-through applications, with the following key determinations:

Approved: VasQ (Breakthrough Alternative Pathway)

VasQ is an external vascular support device designed to improve outcomes for patients undergoing arteriovenous fistula (AVF) creation for hemodialysis. Because VasQ held FDA Breakthrough designation, it was exempt from the clinical improvement test. CMS verified it met the cost and category criteria, granting TPT approval with an effective date of October 1, 2024 (continuing through CY2026).

Approved: SCOUT MD Surgical Guidance System (Breakthrough Alternative Pathway)

The SCOUT MD system utilizes implantable electromagnetic reflectors to guide surgeons during breast tumor excision. Holding FDA Breakthrough designation, it used the alternative pathway. CMS verified it met the cost threshold, approving TPT status effective January 1, 2025 (continuing through CY2026).

Denied: Axoguard HA+ Nerve Protector (Failed Substantial Clinical Improvement)

The Axoguard HA+ Nerve Protector is a nerve protection wrap used in peripheral nerve repair. Because the device did not hold FDA Breakthrough designation, it had to satisfy the substantial clinical improvement test on its own merits.

The Denial Reason: CMS denied the application because it failed the substantial clinical improvement criterion (42 CFR § 419.66(c)(2)). The evidence submitted did not demonstrate that the device substantially improved the diagnosis or treatment of illness or injury compared to currently available alternatives.

Denied: LithoVue Elite Single-Use Digital Flexible Ureteroscope (Failed Device-Category)

Boston Scientific applied for TPT status for the LithoVue Elite, a single-use ureteroscope that integrates intrarenal pressure monitoring.

The Denial Reason: CMS denied the application because it failed the device-category criterion (42 CFR § 419.66(c)(1)). CMS determined that the device was already described by an existing active pass-through category — C1747, "Endoscope, single-use (i.e. disposable), urinary tract, imaging/illumination device (insertable)." The addition of pressure monitoring did not warrant the creation of a new, distinct category.

Denied: VersaVue Single-Use Flexible Cystoscope (Failed Substantial Clinical Improvement)

The VersaVue is a single-use flexible cystoscope designed for bladder examinations.

The Denial Reason: Because the device did not hold FDA Breakthrough designation, it had to meet the substantial clinical improvement test. CMS evaluated the submitted literature and determined the sponsor failed to prove the device offered a substantial clinical improvement over existing reusable cystoscopes. The clinical data only showed equivalence in visualization and safety, not superiority.

Watch This Space: Proposed Repeal of the Breakthrough Alternative Pathway

The alternative pathway described above is currently active for CY2026, but its future is uncertain. On April 14, 2026, CMS published the FY 2027 Inpatient Prospective Payment System (IPPS) proposed rule, which contains a parallel proposal to repeal the Breakthrough-device alternative pathway for outpatient OPPS pass-through payments. If finalized in the August 2026 final rule:

OPPS pass-through applications received on or after October 1, 2026 would have to demonstrate substantial clinical improvement through the traditional pathway — the Breakthrough exemption would no longer apply.
Applications submitted before October 1, 2026 could still use the alternative pathway, and existing pass-through device categories (including VasQ and SCOUT MD) would continue for their full two- to three-year duration.

This OPPS proposal mirrors a parallel proposal to repeal the inpatient NTAP Breakthrough alternative pathway. For the full timeline, grandfathering details, and commercialization impact, see our companion analysis of the CMS NTAP repeal for Breakthrough Devices and the FY 2027 IPPS impact. Manufacturers pursuing the alternative pathway in late 2026 should track the August 2026 final rule closely and consider filing before the October 1, 2026 cutoff.

Comparison Matrix: TPT vs. NTAP vs. Comprehensive APC

Device manufacturers often confuse outpatient transitional pass-through payments with other Medicare add-on payments. The most common confusion is with the inpatient New Technology Add-On Payment (NTAP), which we cover in depth in our NTAP application guide for medical devices. The table below outlines the structural differences:

Feature	OPPS Transitional Pass-Through (TPT)	IPPS New Technology Add-On Payment (NTAP)	Comprehensive APC (C-APC)
Clinical Setting	HOPD (Hospital Outpatient) & ASC	Inpatient Hospital (IPPS)	HOPD (Hospital Outpatient)
Payment Unit	Device Category (HCPCS C-code)	Specific Device/Brand (ICD-10-PCS code)	Procedural Bundle (APC code)
Duration	2 to 3 Years	2 to 3 Years	Permanent
Status Indicator	H (Paid separately)	Not Applicable (Inpatient DRG add-on)	J1 (All items packaged)
Clinical Bar	Exempt if FDA Breakthrough; otherwise must prove clinical superiority (42 CFR 419.66(c)(2)).	Exempt if FDA Breakthrough; otherwise must prove clinical superiority.	Not Applicable (No add-on payment)
Payment Formula	Paid at facility cost (charges $\times$ CCR) minus the APC device offset.	Paid at 75% of the cost of the device, capped at a maximum limit.	Fixed APC payment weight; no separate device payment.
Exclusion from Bundles	Excluded from BPCI-Advanced outpatient bundles.	Excluded from BPCI-Advanced inpatient bundles.	Fully Packaged (No carve-out allowed)

Note on BPCI-Advanced: For manufacturers navigating value-based care, securing TPT status (Status Indicator H) or NTAP status is a major commercial shield. As we discuss in our guide on bundled payments for medical devices: BPCI-A and CJR, CMS excludes these add-on payments from the retrospective reconciliation calculations. This means hospitals can adopt high-cost, pass-through-approved devices without eating into their bundle margins, neutralizing price sensitivity.

How to Apply: The Step-by-Step TPT Application Process

Applying for transitional pass-through payment requires coordination between a manufacturer's regulatory, clinical affairs, and health economics and outcomes research (HEOR) teams. The process follows these operational steps:

[Step 1: FDA Clearance / PMA]
              │
              ▼
[Step 2: Check Cost Thresholds (42 CFR 419.66(c)(3))]
              │
              ▼
[Step 3: Compile Clinical Superiority Dossier]
  - RCTs, Registries (Exempt if Breakthrough)
              │
              ▼
[Step 4: Submit HCPCS C-code Request & TPT Application]
              │
              ▼
[Step 5: Review & Implementation]
  - Quarterly updates for codes; Annual rule for categories

Step 1: Secure FDA Market Authorization

You cannot apply for TPT payment until the device has received FDA clearance, approval, or De Novo classification. A pending FDA submission is not accepted.

Step 2: Conduct the Cost-Threshold Analysis

Compile the device's manufacturing costs and average selling price (ASP). Run the mathematical formulas under 42 CFR § 419.66(c)(3) against the payment weight of the target APC.

Action: If the device's price is too low to meet the 25% threshold, evaluate whether the commercial value proposition supports a higher ASP, or if the device must be marketed under the standard packaged APC.

Step 3: Compile the Clinical Evidence Dossier

If the device does not hold FDA Breakthrough designation, compile all peer-reviewed publications, clinical study reports, and registry data. Focus the dossier on demonstrating substantial clinical improvement over existing surgical techniques or diagnostic standards. If the device does hold Breakthrough status, secure the FDA Breakthrough designation letter to claim the clinical-evidence exemption.

Step 4: Submit the HCPCS Level II C-code Request

TPT payments require a dedicated HCPCS C-code. Manufacturers must submit a formal application to the CMS HCPCS Workgroup. The application must include:

A detailed description of the device's design, materials, and clinical function.
The proposed C-code descriptor.
A list of the procedures and CPT codes associated with the device's use.
The average selling price and projected US sales volume.

Step 5: Submit the TPT Application to CMS

Submit the TPT application via the CMS MEARIS (Medicare Electronic Application Request Information System) portal.

Timing: CMS accepts applications on a rolling basis. For quarterly implementation (adding a new C-code to the quarterly OPPS updates), the application must be submitted at least 90 days before the target quarter (e.g., submit by January 1 for an April 1 effective date).
Annual Rule Cycle: While individual C-codes are added quarterly, the formal establishment of new device categories and the final spending projections are reviewed and finalized in the annual OPPS rulemaking cycle (Proposed Rule in July, Final Rule in November).

For a broader perspective on coding strategies, consult our guide on CPT/HCPCS/ICD coding strategy for device reimbursement to align your C-code requests with national billing standards.

Frequently Asked Questions

How long does a device receive OPPS transitional pass-through payment?

Under eCFR 42 CFR § 419.66(g), a device category receives pass-through payments for at least 2 years but not more than 3 years. The exact duration is determined by CMS to ensure sufficient claims data is collected. The pass-through period begins on the date CMS first establishes the category and makes a pass-through payment, and it expires on a predetermined date (typically December 31 of the third year).

What is the difference between OPPS pass-through and NTAP?

The primary difference is the clinical setting and the payment mechanism. OPPS pass-through applies to the hospital outpatient department and ambulatory surgery center settings, paying for device categories via HCPCS C-codes. NTAP applies to the inpatient hospital setting, paying for specific device brands via ICD-10-PCS procedure codes. While TPT payments are calculated by multiplying facility charges by the Cost-to-Charge Ratio (CCR) and subtracting the APC offset, NTAP payments are capped at 75% of the cost of the device.

What does it mean that my device has OPPS status indicator H versus H1 or J1?

Status Indicator H: Indicates your device has active transitional pass-through status. The hospital receives a separate, add-on payment for the device, and the cost is excluded from packaging.
Status Indicator H1: A specialized SI for non-opioid pain relief devices. It provides separate payment under the OPPS, but is subject to different cost and clinical criteria than standard TPT devices.
Status Indicator J1: Indicates the procedure is a Comprehensive APC. Under J1, Medicare packages all services, drugs, and devices into a single payment. However, if a device has Status Indicator H, its TPT payment is carved out of the J1 package, ensuring separate payment.

Can an FDA Breakthrough device get pass-through without meeting all the usual criteria?

An FDA Breakthrough device is exempt from only one of the three criteria: the substantial clinical improvement requirement (42 CFR § 419.66(c)(2)). The device must still meet the newness/category criterion (proving it is not described by an existing category) and the mathematical cost thresholds (proving it is high-cost relative to the APC).

What causes CMS to deny a device pass-through application, as with LithoVue Elite and VersaVue?

The two primary causes of denial are:

Failure of the Category Criterion (42 CFR 419.66(c)(1)): The device is determined to be functionally similar to an existing category or C-code (as with the LithoVue Elite ureteroscope, which was determined to fit within the existing C1747 endoscope category).
Failure of the Clinical Improvement Criterion (42 CFR 419.66(c)(2)): The sponsor fails to provide high-quality, comparative clinical trial evidence proving the device improves patient outcomes compared to existing options (as with the VersaVue cystoscope, which failed to demonstrate clinical superiority over reusable alternatives).

Disclaimer

This guide is for educational and informational purposes only. The information provided does not constitute financial, reimbursement, coding, or legal advice for any specific medical device, company, or clinical procedure. Medicare coding, payment policies, and billing regulations are complex and subject to change. Manufacturers and providers should consult qualified reimbursement specialists, billing professionals, and legal counsel, and verify current CMS national billing transmittals and eCFR regulations, before submitting reimbursement claims or TPT applications.