Reimbursement Through the Eyes of CMS

Written by Thomas Scully, former administrator of CMS and Foundation Council member

Background on CMS

To provide background about the Centers for Medicare and Medicaid Services (CMS) and how it thinks about focused ultrasound, let me say that CMS does not think about focused ultrasound.

Thomas Scully
Thomas Scully, former administrator of the Centers for Medicare and Medicaid Services (CMS)

CMS is a large organization with 6,000 full-time employees in Baltimore and 10 regional offices with about 50,000 employees plus 12 Medicare Administrative Contractors (MACs) that contract with CMS to run Medicare throughout the country. The MACs make coverage decisions, so focused ultrasound (or any new treatment) must be submitted to the MACs.

Regional MACs

Because the 12 regional MACs make many of the coverage decisions, if a MAC decides to cover a new focused ultrasound treatment under an existing code, that does not mean that commercial payers will also cover the procedure, and it does not even mean that Medicare Advantage plans (private Medicare plans) will pay for it. Generally, though, the private insurers tend to cover procedures that are also covered by Medicare because it is hard for them to say no if Medicare covers it. Medicare coverage gives private insurers an excuse to pay for a procedure, so Medicare decisions have become the leading edge. The first step in achieving coverage is often going to a MAC and making a case for a wonderful new treatment to replace a treatment that has been covered before with an existing payment code.

A Complicated Reimbursement System

The reimbursement system is fair but complicated. It requires proof that a new treatment is better than an existing treatment. This is a high bar, because everyone wants more coverage for everything, and everything is expensive. There is no shortage of physicians, practitioners, hospitals, and outpatient centers asking for coverage decisions. This creates the general feeling that CMS does not want to cover more things.

Procedures can be covered as inpatient, outpatient, or performed in a physician’s office. These are three different pots of money, so there are three different processes for accessing each pot of money.

Inpatient Treatments
Novel, hospital-based (inpatient) treatments for cancer patients are usually covered under existing cancer codes, especially treatments that fall under current Diagnosis-Related Groups (DRGs). Focused ultrasound companies can also apply for a temporary (3-year) add-on code. If a company can convince CMS to make a national coverage decision because its treatment is so superior to other cancer treatments that CMS should carve out a separate hospital payment code for 3 years, the code is issued and tracked. CMS does not issue add-on codes very often, and once again, there is a very high bar for this. After 3 years, if the data are good enough, CMS will add the new DRG and establish an initial payment rate for the hospital procedure.

Outpatient Treatments
The outpatient side has a separate coverage panel but similar process. New treatments are more easily covered when they fall under existing Ambulatory Payment Classification (APC) codes. When the treatment does not fall under an existing code, CMS can be convinced (with data) to issue a 3-year “pass-through” code, but these codes are difficult to obtain. After 3 years, a new outpatient APC code can be issued if the data show a substantial improvement for patients and the reasons why the new treatment cannot be covered under an existing code. However, CMS is moving heavily toward bundled payments for both inpatient and outpatient treatments. That is where CMS is going; it is the reason why CMS is hesitant to issue new codes.

Physician Office Treatments
The third coverage route is for procedures done in a physician’s office. It is based on the recommendation of an AMA RVS (Relative Value Scale) Update Committee (RUC). Companies must go to a RUC and argue that a new code is needed from a budget-neutral pot of money. CMS spends $200 million on physician payments every year; adding a new physician payment and a new facility fee under Medicare Part B removes a payment from another physician and facility, so there is considerable hesitation for the physician community. It is a very complicated process but a fair process for CMS.

Why Should CMS Pay for Focused Ultrasound?

The people who work at CMS are fair but hesitant to add new payments and create change. It is not enough to say, “Look, we have a wonderful new technology…we have focused ultrasound driven by an MRI. Why don’t you pay for it?” The industry must show CMS officials why they – and the taxpayers – should pay for focused ultrasound.

As a reminder, no one at CMS is thinking about focused ultrasound. Achieving coverage is a grind that requires a lot of time and attention, especially for procedures that require a separate payment rather than payment under existing DRG or APC codes. The overall trend for the past 15 years has been paying for bundles and bundles of bigger bundles. It is increasingly difficult to carve out special payments.


In conclusion, CMS likes new technologies, especially those that are significantly dynamic. CMS will add new payment codes and track the data, but it is a complicated hustle and a grind. It is not easy, but it is a fair process. CMS takes a taxpayer point of view. The process may be slower than the industry would like, but CMS is protecting the Medicare trust fund and making sure that the funds are used rationally, which is a good idea for Medicare beneficiaries.

I am happy to give advice about CMS and talk to members of the focused ultrasound community about CMS.

Foundation Council member Tom Scully is a general partner with Welsh, Carson, Anderson & Stowe, the most active US private equity investor in healthcare. He was formerly the administrator of CMS, where he had an instrumental role in designing and passing Medicare Part D and Medicare Advantage legislation and initiated the first public reporting and disclosure for comparative quality among hospitals and other health care providers.

This blog was adapted from his presentation at the 2022 Symposium.