CMS Proposes New Payment Policy for IOPOs and HCLs

In keeping with ongoing efforts to intensify regulatory oversight of organ procurement organizations (OPOs) and curtail improper spending within federal health programs, the Centers for Medicare & Medicaid Services (CMS) recently issued a proposed rule that would, among other adjustments, align Medicare payment policies for non-renal organs to be consistent with those currently applicable to kidneys. If enacted as drafted, this latest rule could have a direct impact on the financial stability of OPOs and histocompatibility laboratories (HCL) at a time when such organizations face increasing pressure to meet CMS’s new outcome measures — or else face non-renewal or decertification later this year. 

Published in mid-April 2026, the FY 2027 Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) Proposed Rule seeks to codify Medicare payment rules relating to independent organ procurement organizations (IOPO) and HCLs, which the agency describes as “part of broader efforts to strengthen Medicare cost reimbursement and appeals policies to ensure payment accuracy and reduce inappropriate spending.” According to CMS, the proposed rule is intended to address reports from its contractors and the Office of Inspector General (OIG) that IOPOs (i.e., independent OPOs, or those not operating in direct affiliation with a transplant hospital) are improperly inflating non-renal organ acquisition costs to exceed reasonable costs. Along similar cost-aware lines, the draft regulation would also codify Medicare’s longstanding prudent buyer principles and clarify nonallowable costs relating to entertainment, outreach, education, and travel.  

New Rule Could Lead to Unanticipated “Lump Sum” Adjustments for IOPOs and HCLs

Under current Medicare law, the reimbursement policy for kidney acquisition costs differs from that applicable to non-renal organs for both IOPOs and HCLs. For kidneys, transplant hospitals pay the IOPO or the HCL for their pre-transplantation services per interim rates established by the Medicare contractor for that IOPO or HCL; payments based on these interim rates are then reconciled after the close of the fiscal year. For non-renal organs, however, rates are determined by IOPOs and HCLs, which are then paid by the transplant hospital (or another OPO acquiring the organ) without an end-of-year reconciliation. Notably, this distinction between renal and non-renal payment policies does not exist for hospital-based OPOs and HCLs, which are subject to the hospital’s annual cost report reconciliation process.

Under the current approach, when an IOPO or HCL establishes a pre-transplantation charge that is higher than what the charges should have been based on reasonable costs incurred, that inflated charge — paid by the transplant hospital or another OPO — is then passed onto Medicare.

In an attempt to align renal and non-renal organ acquisition costs, CMS’s proposed rule would require Medicare contractors to determine IOPO’s standard acquisition charge (SAC) and HCL testing rates for each organ type following the same procedures currently used to set kidney SACs and rates. If an overpayment or underpayment is determined through reconciliation, the Medicare contractor will then effectuate a “lump sum adjustment” for the IOPO or HCL. Put simply: the enactment of this change could leave OPOs and HCLs subject to unexpected and significant repayment obligations at the end of each year, should their payments not align with contractor-set rates.

CMS has delayed implementation until October 1, 2027. At that time, Medicare contractors will establish non-renal organ-specific SACs and rates based on costs associated with procuring each type of non-renal organ for transplantation, as reported by IOPOs and HCLs on their Medicare Cost Reports from the previous fiscal year. Under current regulations, an IOPO or HCL that is dissatisfied with a Medicare contractor’s cost report determination may request a hearing before a contractor hearing officer and then review by a CMS reviewing officer, which issues a decision “on behalf of” the agency’s administrator; the proposed rule would codify into regulation a 2023 standing order that allows appealing organizations to request that the CMS administrator reconsider the reviewing officer’s decision.

The reimbursement methodology shift is not entirely unanticipated. CMS foreshadowed the change during its 2022 rulemaking, stating that it was reviewing the absence of reconciliation for non-renal acquisition costs and noted that requiring reconciliation “could ensure that Medicare reasonable cost principles are followed” and subsequently issued a request for information on a potential change.  At the time, the Association of Organ Procurement Organizations (AOPO) stated that such a reconciliation policy could “force OPOs to increase financial reserves” that could have an adverse downstream effect on transplantation rates. The financial impact of such a change cannot be understated; CMS estimates that the proposal will result in a savings to the Medicare program of $100 million in FY 2028, $500 million over five years from FYs 2027 to 2031, and $1,280 million over 10 years from FY 2027 to FY 2036.

CMS Clarifies “Unallowable Costs” for OPOs

CMS’s proposed rule also responds to OIG reports that OPOs have claimed unallowable costs on their Medicare Cost Reports.  The following is a summary of CMS’s proposals to address unallowable costs:

• • CMS codifies the “prudent buyer principle,” which is addressed in the Provider Reimbursement Manual, and specifies that providers are expected to economize and minimize costs so their actual costs will not exceed what a “prudent and cost-conscious buyer” would pay for a given item or service. 
  • Citing accounts of OPOs seeking reimbursement from Medicare for sporting events and entertainment, CMS states that entertainment costs, including tickets to sporting or other events, are not allowable.
  • CMS announces that costs incurred for “employee morale,” such as an annual employee picnic or holiday party, will no longer be allowable. 
  • Costs of meals provided at OPO-sponsored events will no longer be allowable.
  • Costs incurred by OPOs for public education regarding donor awareness in their designated service area are allowable costs if reasonable and necessary and related to patient care.  However, OPOs should not incur costs and seek reimbursement from Medicare for engaging in “national organ donor awareness campaigns,” which would be duplicative of the U.S. Department of Health and Human Services’ (HHS) national public awareness program. 
  • Professional education costs are allowable if the content is directly related to organ donation and the acquisition of organs for transplantation. However, costs incurred for OPO-sponsored seminars where continuing education credits are given and where the attendee is not on the OPO staff are not allowable. Costs of travel to professional education activities must be related to patient care, reasonable, and necessary to be allowable.
  • CMS states that a review of cost report data shows that providers are not utilizing the Medicare cost report instructions regarding cost allocation. As a result, providers are allocating overhead costs improperly, resulting in inflated and improper reimbursement from Medicare. CMS states that when a transplant hospital “purchases” an organ from an OPO for transplantation, the cost has no relationship to administrative overhead as compared to other services and should not be used to allocate administrative and general costs.

Next Steps for Organizations

Taken together, the proposed rule’s reimbursement reconciliation requirements, expanded unallowable cost classifications, and revised appeals procedures represent a meaningful shift in the regulatory and financial landscape for IOPOs and HCLs.

CMS will be accepting public feedback on its proposed rule until June 9, 2026. Our team is ready and available to assist health care entities that may have an interest in submitting comments. For further details or clarification on what specific proposed program provisions could mean for your business, please contact any author of this alert or your preferred Crowell & Moring lawyer.