The U.S. Centers for Medicare & Medicaid Services (CMS) is taking another stab at preventing the kind of supply chain shocks that left caretakers scrambling for masks, gloves and other essentials during the pandemic.
In an advance notice of proposed rulemaking (ANPRM), the agency is seeking comment on new policy options aimed at strengthening domestic supply chains for personal protective equipment and essential medicines.
Specifically, CMS is floating compensation for higher costs, public recognition for hospitals that purchase domestically made supplies and new measures to track domestic procurement.
Although the ANPRM is hospital-centric, CMS is asking directly how such incentives might work in outpatient settings.
“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,” the ANPRM reads.
According to the agency, threats to preparedness include persistent drug shortages as well as the potential of disruptions in spring 2020, when lockdowns and demand spikes strained supplies such as N95 respirators.
Back then, CMS implemented payment adjustments to help hospitals cover the costs of domestically made N95 respirators. However, the ANPRM points out that less than 100 hospitals reported the necessary information for the payment adjustments.
Now, the agency hopes outreach will lead to a better understanding of the challenges and how to address them.
“We want to hear from hospitals, manufacturers, suppliers, and the public on practical ways Medicare can support a stronger, more reliable domestic supply chain,” CMS Deputy Administrator and Director of the Center for Medicare Chris Klomp said in an announcement. “Whether through targeted designations, payment structures, or other approaches, our goal is to develop options that improve preparedness while giving providers workable, flexible policies that strengthen patient care.”
One proposal pairs a Medicare payment adjustment with public recognition. Hospitals that meet yet-to-be-determined domestic purchasing thresholds would earn a publicly reported “Secure American Medical Supplies” designation and be compensated for “the additional resource costs they incur when procuring these domestically manufactured items.”
Another idea under consideration is using the Hospital Inpatient Quality Reporting (IQR) Program to gauge whether hospitals meet minimum percentages for domestic purchases.
CMS is also asking foundational questions that could shape any future proposal, including what counts as “domestic,” how hospitals would prove compliance, how to audit attestations, and whether the policy should phase in over time with tiers.
The ANPRM is explicitly focused on Medicare participating hospitals.
However, CMS asks directly whether it would be appropriate to broaden a supply chain payment policy “beyond IPPS and OPPS hospitals to other entities that receive Medicare payments.”
Additionally, the ARPNM asks about hospitals purchasing through “GPOs or other third parties” and the role of “third-party distributors vs. direct procurement.” How these organizations respond could affect ambulatory surgery center (ASC) customers downstream.
For now, CMS is only soliciting feedback. But the agency’s framing points to potentially broader, long-term shifts in Medicare policy.
