Goodsurance

Policy & oversight

Medicare Proposes Its First Dedicated Payment Category for AI Clinical Software, With Comments Closing August 31

The 2027 outpatient payment proposed rule would create a new Medicare payment track called Software as a Medical Service, covering tools that use algorithms to generate diagnoses, risk scores, or treatment recommendations.

By the Goodsurance editorial teamAugust 30, 2026

As the public comment period closes August 31, one of the most-discussed elements of Medicare's 2027 Hospital Outpatient Prospective Payment System proposed rule is the agency's effort to build a dedicated payment structure for what it calls Software as a Medical Service, or SaMS.

The proposal, published in the Federal Register on July 7, 2026, would create a Medicare payment category for clinical software that uses algorithms to analyze patient data and produce a diagnosis, a risk score, or a treatment recommendation. Such tools are increasingly deployed in radiology, pathology, cardiology, and other hospital outpatient settings.

Medicare may pay separately for AI diagnostic software used in hospital outpatient settings for the first time. The public comment window closed August 31.

Under the proposal, CMS would designate 36 existing billing codes as SaMS and create a new payment status indicator, O1, marking those services as separately payable in the outpatient system. The agency also proposes moving 21 SaMS codes from standard ambulatory payment groups into new-technology payment groups, which typically carry higher rates for a limited window. Services in the new category would not be subject to multiple-procedure payment reductions.

CMS has described the framework as an interim approach, signaling that permanent rules would follow. Stakeholders including health system technology officers, digital health companies, and clinical societies have submitted comments debating whether the proposal adequately values these tools or introduces new billing complexity.

For beneficiaries, the implication is indirect: Medicare's willingness to pay separately for AI decision-support tools may influence which software hospitals use and what diagnostic aids are routinely available in outpatient care.

In plain words

Medicare is considering a new way to pay hospitals for computer tools that help doctors make medical decisions. Right now many of these AI tools are not paid for separately. The new rule would create a payment category called Software as a Medical Service. Comments from the public were due by August 31. This would be the first time Medicare has its own payment track just for AI clinical tools, and it could affect which tools hospitals make available to patients.

Source: Federal Register (CMS-1850-P)
Read at the source →

More news

Other stories on what is moving in Medicare.

Policy & oversight

CMS Awards Hawaii 58 Million Dollars to Buy Ambulances and Modernize Emergency Dispatch Systems

The federal Rural Health Transformation Program is now reaching Hawaii, with funding aimed at equipping all four counties with new ambulances and upgrading the communications infrastructure used by paramedics and dispatchers.

September 3, 2026

Policy & oversight

Twelve Days Remain to File Comments on Medicare's Proposed 2027 Doctor Payment Rule, Which Would Cut Pay and Restrict Home Monitoring Billing

The 60-day public comment window on CMS's proposed 2027 Medicare physician fee schedule closes September 14. Key proposals include an estimated 1.7 percent net payment reduction for most doctors and new limits on how remote patient monitoring services are billed.

September 2, 2026

Policy & oversight

CMS Says It Stopped 1.6 Billion Dollars in Potentially Fraudulent Medicare Lab Payments Using Artificial Intelligence

The agency credits machine learning and advanced analytics for faster detection of suspicious laboratory billing, with results spanning revocations, payment suspensions, and recovered overpayments.

September 1, 2026

Policy & oversight

Florida Health System Settles Medicare Advantage Coding Fraud Allegations for 541.5 Million Dollars

The Department of Justice announced that The Villages Health System agreed to pay 541.5 million dollars to resolve federal allegations that it submitted unsupported diagnosis codes to Medicare Advantage plans for four consecutive years. Two insurers connected to the same conduct are also returning overpayments.

August 31, 2026

Policy & oversight

Proposed Medicare Rule Would Extend Private Equity and Real Estate Investment Trust Disclosure Requirements to Clinics, Doctor Groups, and Equipment Suppliers

A proposed federal rule would require private equity companies and real estate investment trusts to disclose their ownership stakes in a broad range of Medicare providers, extending transparency requirements that currently apply only to nursing facilities. The public comment window closed August 31.

August 31, 2026

Policy & oversight

CMS Awards 149.3 Million Dollars in First-Round Rural Health Grants to Arkansas to Expand Telehealth and Specialty Care

The federal government awarded 149.3 million dollars in first-round grants to 50 projects in Arkansas that will expand telehealth, specialty care access, and emergency services in rural communities. Medicare-age residents in rural areas are among those expected to benefit from improved provider infrastructure.

August 31, 2026