Proposed Rule2026-01730
Medicare Program; Ensuring Safety Through Domestic Security With Made in America Personal Protective Equipment (PPE) and Essential Medicine Procurement by Medicare Participating Hospitals
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Published
January 29, 2026
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This advance notice of proposed rulemaking solicits public comment on potential options we may consider for Medicare participating hospitals to help foster a more resilient supply chain for American- made personal protective equipment and essential medicines to secure our nation's health and safety and to reflect the additional resource costs incurred when procuring these domestically manufactured items. We seek input on a possible new "Secure American Medical Supplies" friendly designation that could be earned by hospitals that demonstrate their commitment to domestic procurement. In addition, we seek input on potential ways such a designation could facilitate the creation of new, streamlined payment policies to support hospitals in their efforts. We are also seeking input on a potential new structural quality measure as part of the Hospital Inpatient Quality Reporting (IQR) Program that could promote hospital commitments to invest in domestic procurement to secure our nation's health and safety.
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<title>Federal Register, Volume 91 Issue 19 (Thursday, January 29, 2026)</title>
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[Federal Register Volume 91, Number 19 (Thursday, January 29, 2026)]
[Proposed Rules]
[Pages 3851-3856]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01730]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, and 482
[CMS-1516-ANPRM]
RIN 0938-AV72
Medicare Program; Ensuring Safety Through Domestic Security With
Made in America Personal Protective Equipment (PPE) and Essential
Medicine Procurement by Medicare Participating Hospitals
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: This advance notice of proposed rulemaking solicits public
comment on potential options we may consider for Medicare participating
hospitals to help foster a more resilient supply chain for American-
made personal protective equipment and essential medicines to secure
our nation's health and safety and to reflect the additional resource
costs incurred when procuring these domestically manufactured items. We
seek input on a possible new ``Secure American Medical Supplies''
friendly designation that could be earned by hospitals that demonstrate
their commitment to domestic procurement. In addition, we seek input on
potential ways such a designation could facilitate the creation of new,
streamlined payment policies to support hospitals in their efforts. We
are also seeking input on a potential new structural quality measure as
part of the Hospital Inpatient Quality Reporting (IQR) Program that
could promote hospital commitments to invest in domestic procurement to
secure our nation's health and safety.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than March 30, 2026.
ADDRESSES: In commenting, please refer to file code CMS-1516-ANPRM.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1516-ANPRM, P.O. Box 8010,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1516-ANPRM,
Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Ted Oja, (410) 786-4487 or <a href="/cdn-cgi/l/email-protection#bbfffaf8fbd8d6c895d3d3c895dcd4cd"><span class="__cf_email__" data-cfemail="febabfbdbe9d938dd096968dd0999188">[email protected]</span></a>.
Made in America Office, <a href="/cdn-cgi/l/email-protection#024f6366674b6c436f67706b6163426d6f602c676d722c656d74"><span class="__cf_email__" data-cfemail="206d414445694e614d4552494341604f4d420e454f500e474f56">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
I. Background
Sufficient domestic availability of personal protective equipment
(PPE) and essential medicines in the health care sector is a critical
component of emergency public health preparedness. In spring of 2020,
supply chains for PPE faced severe disruptions due to lockdowns that
limited production and unprecedented demand spikes across multiple
industries. Supply of National Institute for Occupational Safety and
Health (NIOSH)-approved[supreg] surgical N95[supreg] respirators -- a
specific type of filtering facepiece respirator (FFR) that is a subset
of N95 respirators used in some clinical settings under conditions
requiring respiratory protection from airborne pathogens and splash
protection from exposure to fluids -- was one type of PPE that
experienced significant supply chain disruptions. So-called ``just-in-
time'' supply chains that minimize stockpiling, in addition to reliance
on overseas production, left U.S. hospitals unable to obtain enough PPE
to protect health care workers. Similarly, shortages for critical
medical products have persisted, with a recent report authored by the
Senate Committee on Homeland Security and Government Affairs noting
that the average drug shortage lasts about 1.5 years.\1\ For
pharmaceuticals, nearly two-thirds of hospitals reported more than 20
drug shortages at any one time--from antibiotics used to treat severe
bacterial infections to crash cart drugs necessary to stabilize and
resuscitate critically ill adults.\2\ Shortages of both essential
medicines and reliable PPE jeopardize patient safety and health care
quality.
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\1\ Senate Committee on Homeland Security & Governmental
Affairs, Short Supply: The Health and National Security Risks of
Drug Shortages, March 2023: <a href="https://www.hsgac.senate.gov/wp-content/uploads/2023-06-06-HSGAC-Majority-Draft-Drug-Shortages-Report.-FINAL-CORRECTED.pdf">https://www.hsgac.senate.gov/wp-content/uploads/2023-06-06-HSGAC-Majority-Draft-Drug-Shortages-Report.-FINAL-CORRECTED.pdf</a>.
\2\ Vizient, Drug Shortages and Labor Costs: Measuring the
Hidden Costs of Drug Shortages on U.S. Hospitals, June 2019: <a href="https://wieck-vizient-production.s3.us-west-1.amazonaws.com/page-Brum/attachment/c9dba646f40b9b5def8032480ea51e1e85194129">https://wieck-vizient-production.s3.us-west-1.amazonaws.com/page-Brum/attachment/c9dba646f40b9b5def8032480ea51e1e85194129</a>.
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In recent years, we have solicited comment and, based on feedback
from interested parties, implemented payment adjustments to Medicare
participating hospitals to reflect the additional costs of procuring
domestically made surgical N95 FFRs and creating buffer stocks of
certain essential medicines. In the Calendar Year (CY) 2023 Outpatient
Prospective Payment System (OPPS)/Ambulatory Surgical Center (ASC)
final rule with comment period (87 FR 72037 through 72047), we
implemented payment adjustments under the OPPS and Inpatient
Prospective Payment System (IPPS) to support a resilient and reliable
domestic supply of NIOSH-approved surgical N95 respirators.. This
payment adjustment is based on the IPPS and OPPS shares of the
difference in cost between domestic and non-domestic NIOSH-approved
surgical N95 FFRs and is available where those costs are separately
tracked, reported and
[[Page 3852]]
appropriately claimed by the hospital on its cost report submitted to
Medicare. As discussed in the CY 2023 OPPS/ASC final rule with comment
period, the payment adjustment is intended to account for the marginal
costs that hospitals face in procuring domestically -made NIOSH-
approved and FDA-certified surgical N95 FFRs. These marginal costs are
due to higher per-unit acquisition prices that stem from higher costs
of inputs and labor in the U.S., as compared to international
suppliers, which make many N95 and other FFRs, as well as a
demonstrated record of more consistent high -quality for domestically -
made products. Usage of the payment adjustments has been limited, and
HHS has conducted stakeholder outreach to better understand barriers to
awareness and uptake and seek feedback on potential modifications that
could increase effectiveness. For FY 2024, less than 100 hospitals
reported the information necessary to determine the payment adjustment
on their cost reports. This low adoption rate may be partially
attributable to administrative reporting burden concerns raised by
stakeholders.
As noted in the CY 2023 OPPS/ASC final rule with comment period, we
received many comments urging us to expand this policy to cover other
forms of PPE and critical medical supplies. A few commenters stated
that other forms of PPE are susceptible to shortages similar to
surgical N95 FFRs, and therefore investing in domestic production for
these products was also important for future emergency preparedness. We
stated that we would consider these comments, and other modifications
to the payment adjustment, for future rulemaking as we gained more
experience with our policy.
In addition to PPE, essential medicines are another critical
component of preparedness. In the Fiscal Year (FY) 2025 IPPS/Long-Term
Care Hospital (LTCH) PPS final rule (89 FR 69387 through 69400), we
finalized a separate payment under the IPPS to small (100 beds or
fewer), independent hospitals for the estimated additional resource
costs of voluntarily establishing and maintaining access to a 6 -month
buffer stock of one or more essential medicines.\3\ Under this policy,
essential medicines are defined as the medicines prioritized in the
report Essential Medicines Supply Chain and Manufacturing Resilience
Assessment developed by the U.S. Department of Health and Human
Services, Administration for Strategic Preparedness and Response
(formally known as the Office of the Assistant Secretary for Strategic
Preparedness and Response) and published in May 2022, and any
subsequent revisions to that list of medicines.\4\ As required by
Executive Order (E.O.) 14336,\5\ the list is currently under review and
is scheduled to be updated in 2026.
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\3\ Hereafter referred to as the ``essential medicines policy.''
\4\ The list is available at <a href="https://www.armiusa.org/wp-content/uploads/2022/07/ARMI_Essential-Medicines_Supply-Chain-Report_508.pdf">https://www.armiusa.org/wp-content/uploads/2022/07/ARMI_Essential-Medicines_Supply-Chain-Report_508.pdf</a>
and there have been no subsequent revisions to the list.
\5\ <a href="https://www.federalregister.gov/documents/2025/08/19/2025-15823/ensuring-american-pharmaceutical-supply-chain-resilience-by-filling-the-strategic-active">https://www.federalregister.gov/documents/2025/08/19/2025-15823/ensuring-american-pharmaceutical-supply-chain-resilience-by-filling-the-strategic-active</a>.
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In the CY 2025 OPPS/ASC proposed rule (89 FR 59396 through 59399),
we solicited feedback and comments on potential modifications to the
surgical N95 FFR policy to increase hospital uptake, reduce reporting
burden, and achieve the policy goal to maintain a baseline domestic
production capacity of PPE to ensure that quality PPE is readily
available to health care personnel when needed.
As discussed in the CY 2025 OPPS/ASC final rule with comment period
(89 FR 94290 through 94295), commenters were supportive of a variety of
modifications to the established policy, including modifications to the
payment adjustment methodology calculation that would provide a
national standard unit cost differential between domestic and non-
domestic NIOSH-approved surgical N95 FFRs, stating that such a
modification would minimize reporting burden for hospitals and ensure
payments to hospitals are equitable. We note that some commenters
differed in their view as to how the cost differential should be
calculated. Commenters also stated that expanding the payment
adjustment to more products would increase uptake of the payment
adjustment by hospitals, strengthen the existing U.S. manufacturing
base, incentivize other manufacturers to prioritize domestic
production, and protect access to high-quality products. Commenters
requested that CMS work with the Congress to give CMS authority to
offset all the marginal costs incurred by the hospital in procuring
domestically manufactured surgical N95 FFRs rather than just the
Medicare share of these costs. Some commenters also indicated that
hospitals have had difficulty ascertaining which products meet the
definition of domestic under the surgical N95 FFR policy and were
supportive of making publicly available a list of products eligible
under the surgical N95 FFR policy.
As also discussed in the CY 2025 OPPS/ASC final rule with comment
period, several commenters urged CMS to expand the payment adjustment
to include other PPE types and medical devices. Examples from
commenters included gowns, hair nets, beard covers, bouffant caps, shoe
covers, face shields, The American Society for Testing Materials (ASTM)
level II and III surgical masks, powered air purifying respirators,
elastomeric respirators, syringes, needles, catheters, and wound care
dressings. Commenters indicated that many of these products are
currently being purchased from non-domestic manufacturers and have been
prone to shortages and quality issues (89 FR 94295). For example, a
commenter cited safety concerns regarding the quality of imported
syringes and needles which they stated have had issues ranging from
leaks to breakages that compromise patient safety.
When finalizing the essential medicines and surgical N95 FFR
policies, we stated that we may consider comments regarding domestic
manufacturing requirements of essential medicines and other forms of
PPE in future rulemaking, and as domestic manufacturing capacity
increases (89 FR 69395 and 87 FR 72039, respectively). We continue to
believe that hospitals' procurement preferences directly influence
upstream intermediary and manufacturer behavior and can be leveraged to
help foster a more resilient supply chain for domestically manufactured
goods, which is foundational to safeguarding timely access and
continuity of care for patients. Therefore, we are seeking public input
on the following policy paths.
1. Domestic Procurement Designation and Payment Adjustment: The
creation of a designation that could be earned by hospitals with a
demonstrated commitment to procuring domestic PPE and domestic
essential medicines. We are also seeking input on a separate Medicare
payment to hospitals that earn the designation to recognize the
additional resource costs they incur when procuring these domestically
manufactured items.
2. Hospital IQR Program: A structural measure requiring hospitals
to attest to meeting the domestic procurement designation minimum
percentages for PPE and essential medicines as part of the Hospital IQR
Program.
3. Additional Options: We also seek additional ideas on other
policy paths within CMS's statutory authority to help foster a more
resilient supply chain for domestically manufactured PPE and essential
medicines.
[[Page 3853]]
II. Provisions of the Advance Notice of Proposed Rulemaking
Hospitals, as major purchasers and users in the U.S. of PPE and
essential medicines, can help to improve safety through domestic
security in the health care sector by procuring PPE and essential
medicines that are made in America. In section III. of this ANPRM, we
seek input on a possible new ``Secure American Medical Supplies''
friendly designation that could be earned by hospitals that demonstrate
their commitment to procuring domestic PPE and essential medicines. In
section IV. of this ANPRM, we seek input on potential ways such a
designation could facilitate the creation of new, streamlined payment
policies to support hospitals in their efforts. These streamlined
payment policies could bolster the domestic supply chain through the
recognition of the additional resource costs hospitals incur when
procuring domestically manufactured items. In section V. of this ANPRM,
we seek input on a potential structural measure requiring hospitals to
attest to meeting the domestic procurement minimum percentages for PPE
and essential medicines as part of the Hospital IQR Program. In section
VI. of this ANPRM, we discuss alternatives we considered but are not
pursuing at this time. In section VII. of this ANPRM, we seek input on
additional options to improve safety through domestic security in the
health care sector.
III. Potential Establishment of a Publicly Reported Hospital
Designation Reflecting Medicare Participating Hospitals' Commitment To
Procuring Domestic PPE and Essential Medicines
In alignment with the President's E.O. 13944 entitled ``Combating
Public Health Emergencies and Strengthening National Security By
Ensuring Essential Medicines, Medical Countermeasures, and Critical
Inputs Are Made In The United States,'' (85 FR 49929) as bolstered by
E.O.s 14293,\6\ 14257,\7\ and 14336,\8\ we are considering establishing
a ``Secure American Medical Supplies'' friendly hospital designation to
be reported on a public website. We believe adding this designation to
a public website would potentially allow Medicare and other payers a
streamlined way to recognize the additional costs that these hospitals
incur to procure domestic PPE and essential medicines as opposed to
non-domestic.
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\6\ <a href="https://www.whitehouse.gov/presidential-actions/2025/05/regulatory-relief-to-promote-domestic-production-of-critical-medicines/">https://www.whitehouse.gov/presidential-actions/2025/05/regulatory-relief-to-promote-domestic-production-of-critical-medicines/</a>.
\7\ <a href="https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits/">https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits/</a>.
\8\ <a href="https://www.whitehouse.gov/presidential-actions/2025/08/ensuring-american-pharmaceutical-supply-chain-resilience-by-filling-the-strategic-active-pharmaceutical-ingredients-reserve/">https://www.whitehouse.gov/presidential-actions/2025/08/ensuring-american-pharmaceutical-supply-chain-resilience-by-filling-the-strategic-active-pharmaceutical-ingredients-reserve/</a>.
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One potential way hospitals could earn this ``Secure American
Medical Supplies'' friendly designation is if they procure sufficient
amounts of PPE and essential medicines that are made in America. This
designation could be obtained by meeting a minimum American-made
percentage of all PPE and all essential medicines, or it could be
obtained by meeting a minimum American-made percentage of each
subcategory (that is, masks or anti-microbial medicines) for which HHS
determines that sufficient domestic producers exist.
For the purposes of this ANPRM discussion, we define ``PPE'' in a
manner consistent with section 70953 of the Infrastructure Investment
and Jobs Act (Pub. L. 117-58) as surgical masks, respirators and
required filters, face shields and protective eyewear, gloves,
disposable and reusable surgical and isolation gowns, head and foot
coverings, and other gear or clothing used to protect an individual
from the transmission of disease. We define ``essential medicines'' as
the 86 medicines prioritized in the report Essential Medicines Supply
Chain and Manufacturing Resilience Assessment developed by the U.S.
Department of Health and Human Services, Administration for Strategic
Preparedness and Response (formally known as the Office of the
Assistant Secretary for Preparedness and Response) and published in May
2022, and any subsequent revisions to that list of medicines.\9\
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\9\ See the discussion in section III. of this ANPRM.
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For all types of PPE, including those covered by the Berry
Amendment \10\ (such as NIOSH-approved surgical N95 FFRs), we are
requesting comment on whether the Make PPE in America domestic content
requirements outlined in section 70953 of the Infrastructure Investment
and Jobs Act (Pub. L. 117-58) would be an appropriate framework for
determining if these types of PPE are wholly made in the U.S. Those
statutory requirements, which apply to procurement of PPE by the U.S.
Departments of Health and Human Services, Veterans Affairs, and
Homeland Security, require the procurement of PPE, including the
materials and components thereof, that is grown, reprocessed, reused,
or produced in the U.S. These statutory requirements have become
familiar to manufacturers of PPE.
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\10\ The Berry Amendment is a statutory requirement that
restricts the Department of Defense (DoD) from using funds
appropriated or otherwise available to DoD for procurement of food,
clothing, fabrics, fibers, yarns, other made-up textiles, and hand
or measuring tools that are not grown, reprocessed, reused, or
produced in the United States. The Berry Amendment was originally
passed by the 77th Congress and later made permanent via Section
8005 of Public Law 103-139.
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We are considering the use of a list of ``critical components and
critical items'' (as defined in FAR 25.003) rather than a general rule
for which items of PPE and essential medicines would be included in
this policy, likely employing the list in FAR section 25.105 (48 CFR
25.105), developed in accordance with E.O. 14005 \11\ and implemented
via rulemaking (87 FR 12781 to 12782). While this list remains
forthcoming at the time of the publishing of this ANPRM, it will be
developed through rulemaking based on the government's quadrennial
critical supply chain review, the National COVID Strategy, and Office
of Management and Budget (OMB) review.
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\11\ <a href="https://www.federalregister.gov/documents/2021/01/28/2021-02038/ensuring-the-future-is-made-in-all-of-america-by-all-of-americas-workers">https://www.federalregister.gov/documents/2021/01/28/2021-02038/ensuring-the-future-is-made-in-all-of-america-by-all-of-americas-workers</a>.
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Alternatively, we could issue guidance every 4 years which lists
all PPE items and essential medicines that are included for purposes of
this potential designation, with specifications for how each item would
count as domestic. Items might include, for example, 100 percent of the
active pharmaceutical ingredient (API) and 50 percent of the key
starting materials (KSMs) for a given essential medicine, or 100
percent of the materials necessary for the manufacture of N95 FFRs.
For essential medicines as defined previously in this ANPRM, we
believe an appropriate standard to qualify as fully domestic for
purposes of this potential designation would be that over 50 percent of
the API and the entire final dosage form (not including components such
as syringes or IV bags) must be manufactured in America, but we invite
feedback on this definition.
Regarding the domestic manufacturing capabilities for the raw
materials and components of PPE and essential medicines, we understand
that certain key inputs may not currently be available domestically in
sufficient quantity or quality to meet market needs. For example, in
the case of nitrile gloves, there is currently one domestically
manufactured source of nitrile butadiene rubber (NBR), an essential
component of nitrile gloves.
[[Page 3854]]
We expect the domestic manufacturing capacity of PPE and essential
medicines to increase over time with a demand for domestically-made
products. To this end, the Administration for Strategic Preparedness
and Response (ASPR) has invested over $136 million to increase domestic
production of nitrile gloves \12\ and the Make PPE In America Act
requires Federal procurement of domestic PPE with multi-year contracts.
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\12\ <a href="https://aspr.hhs.gov/MCM/IBx/portfolio/Pages/Gloves-Nitrile-Health-Supply.aspx">https://aspr.hhs.gov/MCM/IBx/portfolio/Pages/Gloves-Nitrile-Health-Supply.aspx</a>.
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The potential new ``Secure American Medical Supplies'' friendly
hospital designation might initially be based on attestations by
hospitals on their cost report. Hospitals that attest to meeting the
standard could be designated ``Secure American Medical Supplies''
friendly hospitals. The criteria for qualifying for the designation
might change over time as we gain experience with the program and
additional domestic manufacturing capacity develops.
As outlined in this section, quality PPE and essential medicines
are crucial to the safety of health care workers and patients.
Overreliance on imports of PPE and essential medicines jeopardizes
public health and the health and safety of health care workers and
patients, especially in the case of supply chain crises or geopolitical
conflicts. We solicit comment on the following questions:
<bullet> Would a ``Secure American Medical Supplies'' friendly
hospital designation be an appropriate way to facilitate the creation
of streamlined payment policies to bolster the domestic supply chain
through the recognition of the additional resource costs hospitals
incur when procuring domestically manufactured items? Where would it be
most helpful for this designation to appear? What would be the most
appropriate entity to grant this designation? What other ways might be
effective?
<bullet> For administering the designation, what are potentially
useful alternatives to self-attestation? How could hospitals be asked
to provide proof that they purchased from domestic suppliers? Could
hospital accreditors, group purchasing organizations (GPOs) or some
other entity be better positioned to administer oversight of the
designation?
<bullet> What is the most appropriate definition of domestic for
PPE and essential medicines, respectively?
<bullet> If we were to use a designation standard that hospitals
procure a sufficient amount of their PPE and essential medicines
domestically, what would be a sufficient amount? Should this amount be
expressed as a percentage of the PPE and essential medicines procured
by the hospital? If so, what percentage would be appropriate? Should
this amount vary by the type of PPE and subcategory of essential
medicines? How should we measure this activity (by volume, dollar
amount, etc.)? What would be the least burdensome effective method to
audit the procurements, as feasible?
<bullet> What methods could we use to audit statements from
hospitals or manufacturers that PPE and essential medicines are made in
the USA using ingredients and components produced in the USA?
<bullet> What standards designation might be appropriate?
<bullet> Since most essential medicine APIs are produced abroad and
may take time to reshore, how can we encourage domestic final dosage
form production without diminishing long-term demand signals for
domestic API manufacturing?
<bullet> Would having a specific list of items be preferable to a
general rule for determining whether products are domestic?
<bullet> How can manufacturers designate if their product is wholly
domestically made?
<bullet> As discussed in section III. of this ANPRM and in the CY
2025 OPPS/ASC final rule, in the past commenters indicated that
hospitals have had difficulty ascertaining which products meet the
definition of domestic under the surgical N95 FFR policy. How do
purchasers currently identify domestic PPE and domestic essential
medicines? How could this be improved? What is the role of third-party
distributors vs. direct procurement from individual manufacturers?
<bullet> For hospitals purchasing PPE and essential medicines
through GPOs or other third parties, what barriers would such hospitals
face in meeting the requirements of a ``Secure American Medical
Supplies'' friendly designation? How could these barriers be addressed?
<bullet> Should such a policy be phased in over time to increase
hospital adoption and prevent shortages, and if so, how? Should the
designation have ``tiers'' or a potential phase-in that can be adjusted
as more PPE and essential medicine are domestically manufactured? For
example, should such a policy be phased in such that at least 25
percent, 50 percent, and eventually 75 percent of a hospital's total
procurement across contracts for PPE and essential medicine is
domestically manufactured?
<bullet> When and how should we provide flexibilities under such a
policy in the event of supply chain disruptions like natural disasters
and demand surges?
IV. Potential Separate Medicare Payment To ``Secure American Medical
Supplies'' Friendly Hospitals
We expect that the resource costs of domestically manufactured PPE
and essential medicines will generally be higher than the resource
costs of PPE and essential medicines made outside of the United States.
Wholly domestically made, high-quality PPE and essential medicines are
generally more expensive than foreign-made ones, especially those of
lower quality. These higher prices primarily stem from higher costs of
manufacturing labor in the U.S. compared to costs in other countries,
where most PPE and molecular precursors of pharmaceuticals are made.
These higher prices mean higher marginal costs for hospitals for
procuring domestically made PPE and essential medicines. For example,
an ASPR review of publicly available individual and wholesale prices
for both domestic and non-domestic nitrile gloves on manufacturer
websites shows that the price of domestically manufactured nitrile
gloves is approximately 1.5 to 3 times that of non-domestically
manufactured nitrile gloves. A similar ASPR review of the publicly
available prices of API from domestic and non-domestic sources reveals
that domestic API are, on average, approximately 12 times as expensive
as non-domestic alternatives. Therefore, we are considering
establishing a separate payment to ``Secure American Medical Supplies''
friendly hospitals for Medicare's IPPS share of the costs of these
additional resources.
For a given type of PPE, one possible approach could be that we
could derive the separate payment for a hospital using cost report data
on the number of days the hospital treated Medicare fee-for-service
(FFS) patients, reasonable assumptions on PPE use per hospital day, and
the additional domestic PPE unit costs. As an illustrative example for
N95 FFRs, assume General Hospital is a ``Secure American Medical
Supplies'' friendly hospital. If (a) General Hospital billed 10,000
Medicare patient days in a year, (b) the assumed average number of N95
FFRs used per day per patient nationally is 5, and (c) a domestically
produced N95 FFR is assumed to cost $0.20 more than a non-domestic one,
then General Hospital would receive a Medicare payment of $10,000 (=
10,000 days x 5 FFR per day x $0.20 per FFR additional cost).
For essential medicines, one possible approach could be that we
could derive the payments for a hospital using cost report data on
Medicare's IPPS share of
[[Page 3855]]
the hospital's total drug costs and reasonable assumptions on what
percentage of those costs are for essential medicines and the higher
costs of domestically produced essential medicines. As an illustrative
example, if (a) Medicare's IPPS share of General Hospital's total drug
costs as reported on its cost report are $2 million \13\, (b) essential
medicines are assumed to represent 1 percent of those costs, and (c)
domestic essential medicines are assumed to be 12 times more costly,
then General Hospital would receive a Medicare payment of $240,000 (=
$2 million x 1 percent for essential medicines x 12 for the domestic
cost differential).
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\13\ Sum of Drugs Charged to Patients and Medical Supplies
Charged to Patients cost centers (column 5, lines 71 and 73 of
Worksheet D Part II of Form CMS-2552-10.
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For the IPPS, the separate payment to ``Secure American Medical
Supplies'' friendly hospitals could potentially be made in a non-budget
neutral manner under section 1886(d)(5)(I) of the Social Security Act
(the Act). Payment could be provided as a lump sum at cost report
settlement or biweekly as interim lump-sum payments to the hospital,
which would be reconciled at cost report settlement. Specifically, in
accordance with the principles of reasonable cost as set forth in
section 1861(v)(1)(A) of the Act and in 42 CFR 413.1 and 413.9,
Medicare could make a lump-sum payment for Medicare's IPPS share of
these additional inpatient costs at cost report settlement.
Alternatively, a hospital could make a request for biweekly interim
lump sum payments for an applicable cost reporting period, as provided
under 42 CFR 413.64 (Payments to providers: Specific rules) and 42 CFR
412.116(c) (Special interim payments for certain costs). These payment
amounts would be determined by the Medicare Administrative Contractor
(MAC) consistent with existing policies and procedures.
In general, interim payments are determined by estimating the
reimbursable amount for the year using Medicare principles of cost
reimbursement and dividing it into 26 equal biweekly payments. The
estimated amount would be based on the most current cost data
available, which will be reviewed and, if necessary, adjusted at least
twice during the reporting period. (See CMS Pub 15- 1 section 2405.2
for additional information). The MACs would determine the interim lump-
sum payments based on the data the hospital may provide that reflects
the information that would be needed to determine the additional cost
for PPE and essential medicines to maintain the ``Secure American
Medical Supplies'' friendly hospital criteria and the amount of any
separate payment. In future years, the MACs could determine the interim
biweekly lump-sum payments utilizing information from the prior year's
cost report, which may be adjusted based on the most current data
available. This is consistent with the current policies for medical
education costs, and bad debts for uncollectible deductibles and
coinsurance paid on an interim biweekly basis as noted in CMS Pub 15-1
section 12405.2. It is also consistent with the payment adjustment for
domestically sourced NIOSH-approved surgical N95 FFRs (87 FR 72037) and
the separate IPPS payment for the additional resource costs of
establishing and maintaining access to buffer stocks of essential
medicines (89 FR 69387) discussed in section I. of this ANPRM.
As discussed in this section, we are considering establishing a
separate payment to hospitals that earn the ``Secure American Medical
Supplies'' friendly hospital designation to recognize the additional
resource costs of procuring domestically manufactured PPE and essential
medicines. We solicit comment on the following questions:
<bullet> What additional costs or burdens would be incurred by a
health care facility or system to achieve such a designation? How would
medical facilities or systems cover this cost? What resources could we
provide to help Medicare participating hospitals address intangible
barriers to earning the ``Secure American Medical Supplies''
designation?
<bullet> What suggestions do stakeholders have for CMS regarding
facilities' contracts with domestic manufacturers and/or suppliers of
PPE and essential medicine through the ``Secure American Medical
Supplies'' designation? Should there be contracting principles and
elements that should be encouraged as part of this designation?
<bullet> Under the potential approach for domestic PPE, what types
of PPE should be included? \14\
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\14\ As noted in section III. of this ANPRM and as summarized in
the CY 2025 OPPS/ASC final rule, in the past commenters recommended
that the payment adjustment be expanded to additional types of PPE,
including gowns, hair nets, beard covers, bouffant caps, shoe
covers, face shields, ASTM level II and III surgical masks, powered
air purifying respirators, elastomeric respirators, syringes,
needles, catheters, and wound care dressings.
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<bullet> For each type of PPE, would Medicare FFS inpatient days be
an appropriate basis for deriving the Medicare IPPS utilization of the
PPE? If not, what would be an appropriate basis for deriving the
Medicare IPPS utilization?
<bullet> For each type of PPE, what assumptions regarding how many
items of PPE are used per inpatient day (or another basis) would be
appropriate for deriving the Medicare IPPS utilization?
<bullet> For each type of PPE, what would be an appropriate
estimate for the additional domestic PPE unit costs compared to non-
domestic PPE? Please provide supporting evidence.
<bullet> As an alternative to a cost reporting-based approach, how
might a claims-based approach to the payments be structured?
<bullet> Under the potential approach for domestic essential
medicines, would total drug costs as reported on the hospital cost
report be an appropriate starting point for deriving Medicare's IPPS
share of the additional costs to procure domestic essential medicines?
If not, what would be an alternative basis for deriving Medicare's IPPS
share of those costs?
<bullet> In determining the amount of any additional payment,
should essential medicines be subcategorized under our potential
approach rather than treated as a single cost category? If so, what
subcategories should be used?
<bullet> On average, what percentage of a hospital's total drug
costs are for essential medicines (or each subcategory of essential
medicines)?
<bullet> For essential medicines (or each subcategory of essential
medicines), do commenters agree with the assumption for purposes of the
illustrative example that essential medicines are generally 1 percent
of drug costs? What is the breakdown of essential medicine spending
between inpatient and outpatient? What would be an appropriate estimate
for the higher costs of domestically produced essential medicines
compared to non-domestic essential medicines?
<bullet> Should any new IPPS supply chain policy replace existing
IPPS supply chain policies for N95 FFRs and buffer stocks?
<bullet> For PPE, in addition to separate payment for the higher
inpatient hospital costs, should Medicare also consider making separate
payment for the higher outpatient hospital costs? Under our current
policy for domestically produced surgical N95 FFRs \15\ we used our
authority under section 1833(t)(2)(E) of the Act to make separate
payment for the higher outpatient hospital costs, which authorizes the
Secretary to establish, in
[[Page 3856]]
a budget-neutral manner, other adjustments as determined to be
necessary to ensure equitable payments.
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\15\ Discussed in section III. of this ANPRM.
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<bullet> Would a payment adjustment to account for the Medicare FFS
share of these additional costs be sufficient to encourage hospitals to
increase their purchasing of domestically made PPE and essential
medicines?
<bullet> Would it be appropriate to expand a potential payment
policy beyond IPPS and OPPS hospitals to other entities that receive
Medicare payments? How could such an expansion be structured? For
example, physicians and other Medicare suppliers do not file cost
reports. What alternatives to a cost-report-based approach (for
example, a claims-based approach) might be appropriate, including for
hospitals? How might such alternatives be structured?
<bullet> What methods should be used to assess longer-term benefits
with respect to patient safety that may result from more resilient
domestic supply chains for critical PPE and essential medicines?
V. Hospital IQR Program Measure
This section discusses the background and history of the Hospital
IQR Program and a request for information on a structural measure of
domestic procurement.
A. Background and History of the Hospital IQR Program
The Hospital IQR Program is a pay-for-reporting program intended to
measure the quality of hospital inpatient services, improve the quality
of care provided to Medicare beneficiaries, and facilitate public
transparency. Section 1886(b)(3)(B)(viii) of the Act states that
subsection (d) hospitals participating in the Hospital IQR Program that
do not submit data required for measures selected with respect to such
a year, in the form and manner required by the Secretary, will incur a
reduction to their annual payment update for the applicable fiscal year
of one-quarter of the market basket update. We refer readers to our
previous IPPS final rules for detailed discussions of the history of
the Hospital IQR Program, including statutory history, and for the
measures we have previously adopted for the Hospital IQR Program
measure set. We also refer readers to 42 CFR 412.140 for Hospital IQR
Program regulations.
B. Request for Information on a Structural Measure of Domestic
Procurement
We seek public input on the potential adoption of a structural
measure that would require hospitals to attest to meeting the domestic
procurement minimum percentages for PPE and essential medicines as part
of the Hospital IQR Program. Similar to how hospitals could potentially
earn a ``Secure American Medical Supplies'' friendly designation as
described earlier, hospitals could be required to attest ``yes'' or
``no'' as to whether they met a minimum percentage of American-made PPE
and essential medicines, as well as whether they met minimum
percentages of relevant or applicable products and supplies in each
category (that is, for example, masks under PPE or anti-microbial
medicines for essential medicines)if sufficient domestic producers
exist. We solicit comment on this attestation measure and the following
questions:
<bullet> Would a structural attestation measure in the Hospital IQR
Program be an appropriate way to bring transparency as to hospital
procurement of domestically manufactured items and incentivize
hospitals to prioritize resources for increasing procurement through
domestic supply?
<bullet> If the measure attestations were to ask hospitals whether
they met a minimum American-made percentage of all PPE and all
essential medicines, as well as whether they met minimum American-made
percentages of each subcategory (that is, masks or anti-microbial
medicines) if sufficient domestic producers exist, what would be a
sufficient minimum percentage?
<bullet> Should the structural measure attestations, including
minimum percentages, be aligned with the attestations and minimum
percentages for the ``Secure American Medical Supplies'' friendly
hospital designation, or should the structural quality measure seek
different information about hospitals' domestic procurement activities
(and if so, what types of activities or attestations would be
appropriate for a measure in the Hospital IQR Program)?
<bullet> What would be the least burdensome effective method to
audit or validate hospitals' attestation responses, as feasible?
<bullet> What are potentially useful alternative measures to an
attestation measure? How could hospitals measure care processes or
outcomes related to impacts of purchasing from domestic suppliers? How
could hospitals be asked to provide proof that they purchased from
domestic suppliers? Could hospital accreditors, GPOs, or some other
entity be better positioned to track or measure hospitals' domestic
procurement activities?
<bullet> Are hospitals aware of evidence-based literature and
independent research that demonstrates the use and availability of
domestically manufactured health care supplies and drugs to improve
health care, health outcome, and safety?
<bullet> How have supply chain disruptions due to the lack of
domestically manufactured PPE and essential medicines impacted the
quality of care at hospitals?
VI. Alternatives Considered: Conditions of Participation for Domestic
PPE and Essential Medicines
In developing these options, CMS considered alternative policy
approaches, including establishing a new Condition of Participation
(CoP) at 42 CFR part 482 for hospitals that participate in Medicare.
Under that approach, hospitals would be required to demonstrate a
commitment to procuring PPE and essential medicines that are made in
America to help secure our nation's health and safety. However, because
the only statutorily available penalty for noncompliance with hospital
CoPs is termination from the Medicare program, we believe this would be
overly burdensome on hospitals and could result in very high additional
costs.
VII. Solicitation of Additional Options: Domestic PPE and Essential
Medicines
In addition to the proposals described earlier, we solicit general
input on additional options from the public. Comments that include
detailed information on economic impacts, timing, potential statutory
authorities, and a discussion of trade-offs are especially useful to
CMS. Include references to research and data in comments where
appropriate.
VIII. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
relevant comments in the preamble to that document.
Mehmet Oz, Administrator of the Centers for Medicare & Medicaid
Services, approved this document on January 22, 2026.
Robert F. Kennedy, Jr.,
Secretary, Department of Health and Human Services.
[FR Doc. 2026-01730 Filed 1-26-26; 5:15 pm]
BILLING CODE 4120-01-P
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