Implant pricing / device cost pass-through

Under Medicare's Hospital Outpatient Prospective Payment System (OPPS), most implant costs are bundled into the Ambulatory Payment Classification (APC) rate for the associated procedure. When a new device enters the market and its cost substantially exceeds what the existing APC rate covers, manufacturers can apply for transitional device pass-through payment status. CMS grants this status for a minimum of two years and a maximum of three years, during which the hospital receives a separate line-item payment on top of the base procedure rate. The intent is to preserve patient access to innovative technology while CMS collects real-world cost data to recalibrate the APC rate appropriately.

In the ASC setting, the rules differ materially. ASC facility payments bundle implant costs into the procedure rate, and separate device billing is only permitted when a device holds active OPPS pass-through status—that status does not automatically transfer. If an ASC uses a device without active pass-through status, it absorbs the device cost entirely within the procedure payment. A no-cost warranty or replacement device further reduces the ASC payment. For commercial payers, implant reimbursement in the outpatient setting is typically invoice-based: the payer reimburses at invoice cost plus a negotiated markup, provided the claim is supported by an itemized device invoice, operative report, and the correct HCPCS code.

For CY 2025, CMS evaluated pass-through applications for two orthopedic-adjacent devices: the CANTURIO Tibial Extension with CHIRP System and the iFuse Bedrock Granite Implant System. CMS raised eligibility questions for both—challenging whether the tibial extension component was truly integral to performing TKA rather than purely additive, and asserting that existing HCPCS codes (C1713, C1889) already described the iFuse device adequately. These challenges illustrate that pass-through approval is not automatic; devices must satisfy specific cost-significance thresholds and clinical integration criteria.

Missing or misapplied pass-through billing is a direct revenue leak. If a hospital outpatient department uses a device with active pass-through status but fails to bill the corresponding HCPCS code with the supporting invoice, it forfeits the entire separate payment—sometimes thousands of dollars per case. Conversely, billing a pass-through HCPCS code for a device whose status has lapsed or was never granted triggers a claim denial or post-payment audit recoupment. In the ASC setting, selecting an implant that costs more than the procedure's bundled rate without a pass-through pathway erodes case margin on every single implant used, a compounding loss in high-volume arthroplasty programs. Understanding pass-through eligibility criteria also informs value-analysis committee decisions: a device under active pass-through evaluation may carry meaningful financial risk if it ultimately does not qualify.