Recognition of pass-through payment for additional (new) categories of devices under the Outpatient Prospective Payment System and Supporting Regulations (CMS-10052)

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Process and Information Required to Apply for Additional Device
Categories for Transitional Pass-Through Payment Status Under
the Hospital Outpatient Prospective Payment System
GENERAL APPLICATION PROCESS FOR ADDITIONAL DEVICE CATEGORIES
This guidance describes the process and information required for applications requesting
additional categories for medical devices that may be eligible for transitional pass-through
payment under the Medicare hospital outpatient prospective payment system (OPPS). The intent
of transitional device pass-through payment, as implemented at 42 CFR 419.66, is to facilitate
access for beneficiaries to the advantages of new and truly innovative devices by allowing for
adequate payment for these new devices while the necessary cost data is collected to incorporate
the costs for these devices into the procedure APC rate.
References:
Refer to the interim final rule with comment period in the November 2, 2001 Federal Register
and the final rule with comment period in the November 1, 2002 Federal Register (67 FR 66781)
and the modifications to certain criteria in the November 10, 2005 (70 FR 68628) final rule with
comment period for a full discussion of the criteria for establishing additional pass-through
categories for medical devices. Refer to the November 20, 2009 Federal Register (74 FR 60471)
for modifications to the pass-through process for implantable biological products. Refer to the
November 10, 2015 Federal Register (79 FR 66885) for modifications to the pass-through
process for skin substitutes. When referring to the device application process and information
requirements in this document, implantable biologicals and skin substitutes are also included.
Refer to the interim final rule with comment period in the November 13 2015, Federal Register
(80 FR 70416) for modifications to the pass through process and the addition of a newness
criterion. These rules can currently be found at http://www.cms.gov/HospitalOutpatientPPS.
Timeline for Submissions:
We will accept transitional pass-through applications for additional categories for medical
devices on an ongoing basis. However, we must receive applications sufficiently in advance of
the first calendar quarter in which transitional pass-through payment is sought to allow time for
analysis, decision-making, and systems changes. The table below indicates the earliest date that
pass-through status could be implemented once a completed application and all additional
information are received.
Complete application submitted by the
first business date in:
March
June
September
December

Earliest effective date for pass-through
status:
July 1
October 1
January 1
April 1

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Beginning in CY 2016, all device pass-through applications will go through the OPPS annual
rulemaking process in addition to being evaluated on a quarterly basis. Applications approved
during the quarterly process will receive a pass-through effective date at the start of the next
quarter after approval, and subsequently we would either finalize device pass-through payment
status or discontinue pass-through payment status in the final rule. In the unusual case in which
an applicant is approved during the quarterly process and then a decision is made in rulemaking
to reverse the approval, the applicant could reapply with new information, in advance of the
following year’s proposed rule, as long as the device is still new (i.e., reapplication is within 3
years of initial FDA approval or clearance).
For applications not approved during the quarterly review process, through rulemaking we would
either approve device pass-through payment or deny the application for pass-through payment in
the applicable final rule. Applicants who are not approved during the quarterly review process
may withdraw their applications if they do not wish to go through the rulemaking process. If
such a decision is made, the application will be considered to be denied.
Because CMS intends to make application information available to the public for analysis and
comment, applicants are advised that any information submitted, such as research findings and
financial data, is subject to disclosure and publication through annual rulemaking. If you are
providing data or information that is proprietary or otherwise protected from disclosure under the
Trade Secrets Act or Exemption 4 under the Freedom of Information Act, please mark this
information as such. CMS will attempt, to the extent allowed by Federal law, to keep this
information protected from public view
Who may apply?
Device, implantable biological, skin substitute manufacturers, or other interested parties may
apply for a new device category for transitional pass-through payments.
Can a device be included in more than one category?
No. The law requires that new categories be established in such a way that no medical device is
described by more than one category.
Are there cost requirements for devices in new categories?
The law requires that the average cost of devices included in a new category be “not
insignificant” relative to the payment amount for the procedure(s) or service(s) with which the
device is associated. The definition of “not insignificant” cost is described below and also in the
November 2, 2001 interim final rule.
How are combination products evaluated?
For combination products (e.g., a product that has a device component and a drug or biological
component), CMS initially evaluates the product to determine which component is the key
therapeutic or diagnostic component, similar to FDA’s “primary mode of action” determination
for assignment to a lead center with primary jurisdiction. Our determination of the key
component is typically consistent with FDA’s primary mode of action determination. However,
our key component determination may be different from FDA’s primary mode of action
determination. After this initial evaluation we then evaluate the item under the device or drug
and biological pass-through process, as appropriate.

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What are the criteria that a device must meet to be eligible for a transitional pass-through
payment?
To be included in a category a device (including an implantable biological or skin substitute)
must meet all of the following criteria:
1. If required by the FDA, the device must have received FDA approval or clearance. This
requirement is met if a device has received an FDA investigational device exemption (IDE)
and has been classified as a Category B device by the FDA in accordance with §§405.203
through 405.207 and 405.211 through 405.215 of Title 42 of the Code of Federal Regulations
or has received another appropriate FDA exemption.
2. The device must —
a. Be an integral part of the service furnished;
b. Be used for one patient only;
c. Come in contact with human tissue; and
d. Be surgically implanted or inserted (either permanently or temporarily) or applied in or
on a wound or other skin lesion.
3. The device is not any of the following:
a. Equipment, an instrument, apparatus, implement, or item of this type for which
depreciation and financing expenses are recovered as depreciable assets as defined in
Chapter 1 of the Medicare Provider Reimbursement Manual (CMS Pub. 15-1).
b. A material or supply furnished incident to a service (for example, a suture, customized
surgical kit, scalpel, or clip, other than radiological site marker).
What are the criteria that CMS uses to establish a new category of devices?
1. Beginning with applications submitted on or after January 1, 2016, a device will only be
eligible for transitional pass-through payment under the OPPS if, in cases where the device
requires FDA approval or clearance, the device meets the newness criterion; that is, the date
of original FDA approval or clearance (or in certain documented cases U.S. market
availability) is within 3 years of the application date for transitional pass-through payment.
Category B IDE devices that have not yet received FDA approval will be considered new.
2. A device to be included in a proposed new category is not appropriately described by any of
the existing (either currently active or expired) categories established for transitional device
pass-through payments. A complete list of established device categories used presently or
previously for pass-through payment is found on the OPPS web site, currently under
http://www.cms.gov/HospitalOutpatientPPS/04_passthrough_payment.asp. A category of
devices does not appropriately describe the new device if the applicant adequately
demonstrates that the candidate device is not similar to devices (including related predicate
devices) included in an existing category. In addition, the applicant must demonstrate
substantial clinical improvement, discussed below, as described in the November 10, 2005
OPPS final rule (70 FR 68630-68631).
3. A device to be included in the category was not being paid for as an outpatient service as of
December 31, 1996.

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4. Substantial Clinical Improvement: CMS determines that a device to be included in the
category will substantially improve the diagnosis or treatment of an illness or injury or
improve the functioning of a malformed body part compared to at least one other currently
available and appropriate treatment or diagnostic test (ie. considered a standard of care,
currently in use and utilized by the Medicare population). Whether a candidate device
provides substantial clinical improvement is evaluated by one or more of the following:
a.
The device offers a treatment option for a patient population unresponsive to, or
ineligible for, currently available treatments.
b.
The device offers the ability to diagnose a medical condition in a patient population
where that medical condition is currently undetectable or offers the ability to diagnose
a medical condition earlier in a patient population than is currently possible and this
earlier diagnosis results in better outcomes. There must also be evidence that use of
the device to make a diagnosis affects the management of the patient.
c.
Use of the device significantly improves clinical outcomes for a patient population as
compared to currently available treatments. Some examples of outcomes that are
frequently evaluated in studies of medical devices are the following:
• Reduced mortality rate with use of thedevice.
• Reduced rate of device-related complications.
• Decreased rate of subsequent diagnostic or therapeutic interventions (e.g., due
to reduced rate of recurrence of the disease process).
• Decreased number of future hospitalizations or physician visits.
• More rapid beneficial resolution of the disease process treated because of the
use of the device.
• Decreased pain, bleeding, or other quantifiable symptom.
• Reduced recovery time.
How does CMS determine whether the cost of devices that would be included in an
additional category is “not insignificant”?
CMS considers the average cost of devices that would be included in an additional category and
that are being marketed at the time the category is established to be “not insignificant” if the
following conditions are met:
1.
The estimated average reasonable cost of devices in the category exceeds 25 percent of the
applicable APC payment amount for the service associated with the category of devices.
2.
The estimated average reasonable cost of the devices in the category exceeds the cost of
the device-related portion of the APC payment amount for the service associated with the
category of devices by at least 25 percent.
3.
The difference between the estimated average reasonable cost of the devices in the
category and the portion of the APC payment amount determined to be associated with the
device in the associated APC exceeds 10 percent of the total APC payment.
How long is a new category eligible for a pass-through payment?
A new device category is eligible for a pass-through payment for at least 2 years, but not more
than 3 years beginning on the date that CMS establishes the category.

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Where can I find more information about past or current transitional pass-through
payments for categories of medical devices?
A complete list of established device categories used presently or previously for pass-through
payment is found on the OPPS web site, currently under
http://www.cms.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
TEMPLATE FOR APPLICATION SUBMISSION
To enable CMS to make an appropriate determination that the criteria for an additional category
of new medical devices are met, applications for an additional device category must include all
of the information listed below. A separate application is required for each distinct additional
category that is being requested. An application that does not include all of the following
information is considered incomplete and cannot be acted upon. Please supply the following
information:
A. Proposed name or description for the additional category.
B. Trade/brand names of any known devices fitting the proposed additional category.
(Applications must include the name and description of at least one marketed
medical device, or device with a Category B investigational device exemption, that
would be placed in the proposed additional category.)

C. A list of all established device categories used presently or previously for passthrough payment that describe related or similar products. For each established device
category, provide a detailed explanation as to why that category does not encompass
the nominated device(s).
D. Detailed description of the clinical use(s) of each nominated device requiring
an additional category.
Describe each nominated device fully:
1. What is it? Provide a complete physical description of the device including its
components, e.g., hardware, software, reservoir, tubing, its composition, coating,
or covering.
2. What does it do?
3. How is it used?
4. What makes it different from similar products of the same type?
5. What are its clinical characteristics, e.g., is it used for diagnosis or treatment, what
is its life span, what are the complications associated with its use, for what disease
processes and patient populations is it used?
6. Submit relevant booklets, pamphlets, brochures, product catalogues, price lists,
and/or package inserts that further describe and illuminate the nature of the
nominated device.
7. Using Healthcare Common Procedure Coding System (HCPCS) Level I and/orLevel
II code(s), list all of the specific procedure(s) and/or services with which the
nominated device is used. HCPCS Level I is the American Medical Association’s
Current Procedural Terminology (CPT); HCPCS Level II National Codes are
alpha- numeric codes that describe medical services and supplies not contained in
CPT.

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8. If a device replaces or improves upon an existing device, identify the trade/brand
name of the existing device and any HCPCS Level I and/or Level II code(s) used
to identify the existing device.
9. Identify by name and manufacturer similar devices that would also become eligible
for transitional pass-through payment under the proposed additional category,
insofar as this information is known to the applicant.
E. Substantial Clinical Improvement information:
Provide a full discussion of the evidence supporting the proposition that the device for
which an additional category is requested meets the substantial clinical improvement
criterion. This discussion must include evidence to demonstrate that the device under
consideration satisfies one or more of the measures of “substantial clinical improvement”
that are listed above in this announcement. While we prefer published peer-reviewed
clinical trials, we will consider all supporting evidence.
For each claim of substantial clinical improvement over existing technologies, in
table format (see sample table 1 below), list the claim of substantial clinical
improvement and summarize the supporting information to include relevant clinical
trial(s) or data. The application is incomplete without this table.
F. Sales and Marketing:
Provide the following information for the device(s) for which an additional category is
proposed:
1.
Date the device for which an additional category is requested was first marketed-a. In the United States
b. Outside the United States
2.
Date of sale of first unit of the device nominated for an additional category-a.
In the United States
b.
Outside the United States
3.
Number of device(s) nominated for an additional category that have been sold
up to the date of the application.
4.
Number of facilities currently using the nominated device.
5.
Projected total annual utilization for both the nominated device and for
the proposed device category as a whole.
6.
Indicate the annual projected utilization of the nominated device in connection
with each HCPCS with which it is used. For example, projected utilization in
connection with CPT code A equals 300 cases using 1 device per case;
utilization in connection with CPT code B equals 1500 cases using 3 devices per
case; utilization in connection with HCPCS code C equals 50 cases with 6
devices required per case.
7.
For each CPT code associated with a device, estimate annual utilization by site of
service, that is, for HCPCS code A, projected utilization is 40% hospital
outpatient, 30% ambulatory surgical center, 10% hospital inpatient, 20 %
physician office.
G. Cost:
Indicate the current cost of the device to hospitals, that is, the actual cost paid by
hospitals for the device net of all discounts, rebates, and incentives in cash or in kind. In
other words, submit the best and latest information available that provides evidence of
the hospitals’ actual cost for the nominated device.

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H. FDA Approval:
1.
If the device requires approval or clearance by the Food and Drug Administration
(FDA), submit a copy of the FDA approval/clearance letter.
2.
Summary of Safety and Effectiveness
3.
If the device has an investigational device exemption (IDE), submit the FDA
approval letter and indicate whether it is a “Category B” IDE.
4.
If the device is covered by a guidance document or is exempt from FDA approval
or clearance, provide the complete citation of the guidance level regulation or
exemption from approval or clearance.
5.
If a new category of devices is exempt from FDA approval or clearance, or the
FDA has chosen an alternate regulatory scheme (e.g., guidance documentation
during a defined period of time), then the applicant should so state, along with
supporting references and citations.
6.
Date of FDA approval or clearance. If necessary, submit the date of U.S. market
availability and documentation verifying delay between FDA approval and market
availability.
I. Contact Information: Name(s), address(es), e-mail address(es) and telephone number(s)
of the party or parties making the request and responsible for the information contained
in the application. If different from the requester, give the name, address, e-mail address,
and telephone number of the person that CMS should contact for any additional
information that may be needed to evaluate the application.
J. Other information as CMS may require in order to evaluate specific requests or that
the applicant believes CMS may need to evaluate the application.
Where are applications to be sent?
Mail 5 copies of each completed application, at least one of which should be an unbound copy,
to the following address:
OPPS Additional Pass-Through Category of
Device Division of Outpatient Care
Mailstop C4-04-25
Centers for Medicare and Medicaid
Services 7500 Security Boulevard
Baltimore, MD 21244-1850
Electronic copy requirement:
Send the entire application, including all attachments and appendices, via email to
[email protected]. Email versions of the application must be compatible with
standard CMS software, such as Adobe Acrobat 9.0 and Microsoft Word 2013. The email copy
of the application does not substitute for the hard copies required. We do not accept applications
by facsimile (FAX). Questions pertaining to the pass-through payment application process may
also be sent via e-mail to the electronic mailbox noted above.

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Table 1: Summary of Substantial Clinical Improvement highlights that
support the asserted substantial clinical improvement claim(s).
Item
number

Substantial
Clinical
Improvement
Claim

Supporting
evidence/ data

Study Type
(e.g., case
series, casecontrol,
randomized
clinical trial)
and
comparator(s)
if applicable
RCT

Page number
and paragraph
of cited study

For each row, if necessary, provide a 500 character
summary of the information cited in this row

1a1.

Reduced
mortality rate in
comparison to
competitor
drug/device

Doe, et al,
“Reducing
mortality in
disease X
population: analysis,” JAMA
2019, vol. 2(5),
pp. 12-23.

Pg 12
methodology

RCT used to compare mortality rates between Drug 123 vs.
789 for disease X resulting in a 5% decrease in mortality rate
for Drug 123 (p=0.02)

1a2.

Reduced
mortality rate in
comparison to
competitor
drug/device

Doe, et al,
“Reducing
mortality in
disease X
population: analysis,” JAMA
2019, vol. 2(5),
pp. 12-23.

RCT

Pg 13 control
and test arm
description

Pertinent exclusion criteria were (only list exclusion criteria that
is pertinent to supporting the reduced mortality rate) Controls
were equally distributed among gender, race, Socioeconomic
status. Both arms started drug 123 and 780 at baseline.

1a3.

Reduced
mortality rate in
comparison to
competitor
drug/device

Doe, et al,
“Reducing
mortality in
disease X
population: analysis,” JAMA
2019, vol. 2(5),
pp. 12-23.

RCT

Pg 14 mortality
rate results

3,6 and 9 months indicated statistically significant decreases in
mortality rates for drug 123 w p- values 0.02, 0.05, 0.03
respectively.

1b.

Reduced
mortality in
comparison to

Smith, J et al.
“Mortality rate
improvement
using XXX in

Case Control

Pg 234
methodology

4 indicated statistically significant decreases in mortality rates
for drug 123 w p- value 0.02

Please provide
reference

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competitor
drug/device

current therapy
with YYY.
Lancet 2019,
vol. 15, pp 230245

Pg 240
mortality rate

2.

Decreased rate
of subsequent
diagnostic or
therapeutic
interventions

Doe, et al,
“Reducing
mortality in
disease X
population: analysis,” JAMA
2019, vol. 2(5),
pp. 14.

Meta-Analysis

Pg 14

Studies demonstrate lower length of stay which results in less
interventions.

3.

Decreased
number of
future
hospitalizations
or physician
visits

Case Study
Data from
Physicians

Collected by
applicant and
not published

Supplemental
Document
provided in
application

Compared outcomes within 30 days which demonstrated lower
readmission rate.