AI Regulation Tracker / Proposed rule

CMS Proposes First Medicare Payment Framework for AI Clinical Software (SaMS)

Regulatory summary: CMS's CY2027 OPPS proposed rule (Federal Register, July 7, 2026; comments close August 31, 2026) creates a "Software as a Medical Service" payment class for AI and algorithmic clinical software, adds status indicator O1, designates 36 HCPCS codes as SaMS, and reclassifies algorithmic reanalysis of stored lab data out of.

The CY2027 outpatient rule would pay AI and algorithmic clinical software as its own service class and pull software-heavy lab analyses out of the lab fee schedule.

Primary source

By Anthony Guerriero, Founder, The Leveraged Years · Reviewed by The Leveraged Years Editorial Desk · Published July 9, 2026 · Last updated July 9, 2026

CMS Proposes First Medicare Payment Framework for AI Clinical Software (SaMS) regulation briefing

The Leveraged Years AI Regulation Tracker

Key takeaways

CMS proposes a distinct "Software as a Medical Service" payment class with new status indicator O1, moves 21 SaMS codes into New Technology APCs, and proposes that algorithmic reanalysis of stored lab data no longer counts as a Clinical Laboratory Fee Schedule test (10 codes shifting to OPPS).
Radiologists, pathologists, cardiologists, clinical and genomics/molecular labs, hospital revenue-cycle and finance teams, healthcare compliance counsel, and AI-diagnostic software vendors
Status: Proposed.
File comments by Aug 31, 2026; inventory affected HCPCS codes, model New Technology APC rates versus current CLFS/clinical APC payment, and flag CLIA and coverage assumptions tied to reclassified lab codes

Regulatory Briefing

Bindingness: Proposed federal rule (notice-and-comment)
Scope: Medicare hospital outpatient (OPPS) payment for AI/algorithmic clinical software and software-intensive lab analyses; 36 HCPCS codes designated SaMS
What Changed: CMS proposes a distinct "Software as a Medical Service" payment class with new status indicator O1, moves 21 SaMS codes into New Technology APCs, and proposes that algorithmic reanalysis of stored lab data no longer counts as a Clinical Laboratory Fee Schedule test (10 codes shifting to OPPS).
Who This Affects: Radiologists, pathologists, cardiologists, clinical and genomics/molecular labs, hospital revenue-cycle and finance teams, healthcare compliance counsel, and AI-diagnostic software vendors
Current Status: Proposed; comment period open through Aug 31, 2026
Effective Date: If finalized, CY2027; proposed now (not final)
Primary Source: https://www.federalregister.gov/documents/2026/07/07/2026-13656/medicare-program-hospital-outpatient-prospective-payment-and-ambulatory-surgical-center-payment
Secondary Analysis: Reed Smith, "CMS Proposes an Interim Payment Policy for Software as a Medical Service" (Jul 2026); Holland and Knight, "CMS Issues Sweeping CY 2027 Hospital OPPS/ASC Proposed Rule" (Jul 2026)
Workflow Impact: Affected HCPCS codes move payment status and, for lab analyses, move fee schedules; separate APC payment under O1 changes how outpatient software claims price and post
Operational Next Step: File comments by Aug 31, 2026; inventory affected HCPCS codes, model New Technology APC rates versus current CLFS/clinical APC payment, and flag CLIA and coverage assumptions tied to reclassified lab codes
Last Verified: July 9, 2026

Date	Jurisdiction	Rule	Affected professionals	Status or effective date
2026-07-09	United States	CMS proposes a distinct "Software as a Medical Service" payment class with new status indicator O1, moves 21 SaMS codes into New Technology APCs, and proposes that algorithmic reanalysis of stored lab data no longer counts as a Clinical Laboratory Fee Schedule test (10 codes shifting to OPPS).	Radiologists, pathologists, cardiologists, clinical and genomics/molecular labs, hospital revenue-cycle and finance teams, healthcare compliance counsel, and AI-diagnostic software vendors	Proposed; comment period open through Aug 31, 2026

Frequently Asked Questions

Is this rule in effect now?

No. It is a proposed rule published July 7, 2026, and the comment period is open through August 31, 2026. If finalized, the changes would apply for CY2027. Any provision can change before a final rule.

What does status indicator O1 mean for payment?

O1 designates software as a medical service paid under OPPS with separate APC payment. It is reported to function like status indicator S, so the service is paid separately and is not subject to multiple-procedure discounting.

How many codes are involved?

CMS proposes designating 36 HCPCS codes as SaMS, moving 21 codes into New Technology APCs, and transferring 10 codes from the Clinical Laboratory Fee Schedule into OPPS.

Why would an AI reanalysis of lab data stop being a lab test?

CMS reasons that a secondary, software-driven analysis of already-stored genomic, transcriptomic, or digital pathology data does not itself require CLIA-regulated laboratory work, so it argues Clinical Laboratory Fee Schedule payment is not appropriate.

What is the single most important action item?

Inventory the affected HCPCS codes, model New Technology APC payment against current rates, and file a comment with CMS by August 31, 2026 if your revenue is exposed.