Medicare Cost Reimbursement Changes Coming
In the fiscal year (FY) 2027 Inpatient Prospective Payment System (IPPS) final rule, CMS finalized a major policy change that will significantly alter how Medicare reimburses non-renal organ acquisition costs for organ procurement organizations (OPOs) and histocompatibility laboratories (HCLs).1 Beginning with cost reporting periods on or after October 1, 2028, Medicare will require reconciliation of non-renal organ acquisition costs and payments using Medicare reasonable cost principles.
The IPPS rule represents one of the most substantial reimbursement changes affecting OPOs in recent years and is expected to increase scrutiny over standard acquisition charge (SAC) development, cost allocation methodologies, supporting documentation, and Medicare cost reporting.
Why Is CMS Making This Change?
Historically, Medicare cost reimbursement for independent OPOs (IOPOs) was limited to kidney acquisition costs, while non-renal organs were reimbursed through organ-specific acquisition charges developed by the OPO with limited Medicare contractor oversight. CMS expressed concern that this methodology may result in Medicare reimbursing amounts that exceed reasonable costs.
Under the finalized policy, Medicare will expand cost reimbursement principles beyond kidneys and require reconciliation of acquisition costs for all organs, including non-renal organs.
As part of its analysis, CMS reviewed 2024 OPO data and found that non-renal organ acquisition revenues exceeded reported costs by approximately $100 million. CMS concluded that additional oversight is necessary to ensure Medicare payments align with reasonable cost reimbursement principles.
CMS estimates the policy will ultimately reduce Medicare spending by approximately $1.16 billion over 10 years.
What the Final Rule Requires
Under the new framework, Medicare Administrative Contractors (MACs) will play a much more active role in reviewing and approving reimbursement rates for non-renal organ acquisition services. Key provisions include:
- MAC review and approval of organ-specific Standard Acquisition Charges (SACs) for non-renal organs.
- MAC review and approval of HCL testing rates.
- Reconciliation of interim payments to actual reasonable costs reported on Medicare cost reports.
- Settlement of overpayments and underpayments through the Medicare cost report process.
- Ongoing contractor oversight of rate development and modifications.
The methodology will generally mirror the cost reconciliation approach Medicare currently uses for kidney acquisition costs.
Increased Importance of SAC Development
As a result, SAC development will become both a reimbursement strategy and a compliance function. Because Medicare interim payment rates are generally developed using historical cost and volume data, they may not fully reflect current-year operating conditions.
For OPOs, where acquisition costs and organ volumes can fluctuate significantly, this creates added cash flow risk and increases the importance of developing defensible, organ-specific SACs supported by detailed financial and operational projections.
In general, the interim SAC may be calculated using the most recently filed cost report’s total acquisition costs and usable organ volume to determine a cost per organ. This approach is similar to interim rate-setting in other Medicare cost-reimbursed settings, such as critical access hospitals. However, CMS acknowledged that reliance on historical data can be problematic for IOPOs experiencing dynamic or unanticipated changes in volume.
In response, CMS finalized a framework requiring organizations to support charge development using:
- Historical acquisition costs
- Historical organ volumes
- Anticipated future costs
- Anticipated future organ volumes
- Documentation supporting significant changes in operations or cost structure
Organizations may request SAC adjustments when circumstances materially change, although adjustments in general may not occur more frequently than quarterly. This flexibility is important because interim rates based on historical cost and volume data may not reflect current-year operating changes, creating potential cash flow volatility.
CMS appears to recognize this challenge and has established a process for OPOs to support SAC adjustments with appropriate documentation. As the process develops, OPOs should closely monitor MAC expectations for required support, review timelines, and approval procedures.
Medicare Reasonable Cost Principles Become Critical
As reimbursement becomes subject to cost reconciliation, OPOs and HCLs should expect increased MAC audit scrutiny, particularly regarding Medicare reasonable cost principles under 42 CFR Part 413 and CMS Publication 15-1. CMS specifically emphasized the importance of strong internal controls designed to prevent unallowable costs from being included on the Medicare cost report.
CMS also acknowledged and attempted to clarify several operational nuances unique to OPOs when applying reasonable cost principles to Medicare cost reporting. A thorough understanding of these principles can help reduce the risk of adverse cost report findings and support more defensible reimbursement methodologies. Organizations should consider:
- Prudent buyer principles that were addressed in the final rule, as applied to OPOs
- Cost finding methodologies
- Allocation statistics and supporting data
- Documentation of direct and indirect organ acquisition costs
- Treatment of shared and overhead expenses
- Treatment of public education and donor awareness expenses
- Allocation of home office or other parent organization costs to each IOPO
- Supporting documentation for projections used in SAC development
- Internal controls surrounding cost report preparation and reimbursement reporting
Because future reimbursement will ultimately be reconciled to reasonable costs, organizations may face increased audit exposure if cost report methodologies cannot be adequately supported. With a single MAC currently contracted by CMS to review OPO cost reports, organizations also should consider the potential for delays in receiving a Notice of Program Reimbursement, which represents final settlement of the Medicare cost report.
Steps Organizations Should Consider Now
Although implementation has been delayed until cost reporting periods beginning on or after October 1, 2028, organizations may benefit from early preparation efforts. Areas to look over include:
- Current SAC development methodologies
- Cost allocation practices
- Availability of historical organ-specific volume data
- Documentation supporting projected costs and volumes
- Medicare cost report processes and controls
Looking Ahead
While CMS delayed implementation by one year in response to stakeholder feedback, the agency clearly signaled its intent to transition non-renal organ acquisition reimbursement toward a more traditional Medicare reasonable cost framework.
For IOPOs and HCLs, the transition period provides an opportunity to strengthen cost reporting processes, evaluate SAC methodologies, and develop documentation that can withstand future reimbursement review and audit scrutiny. Organizations that begin preparing now may be better positioned to manage cash flow, support future reimbursement positions, and respond effectively to MAC review.
How Forvis Mazars Can Help
Our Healthcare team is uniquely positioned to help OPOs prepare for this transition. As the nation’s leading preparer of Medicare cost reports currently (based on data provided by Health Financial Systems), our team brings deep experience with Medicare reasonable cost principles, cost-based reimbursement, cost allocation methodologies, and MAC review expectations. That perspective can help organizations move from policy awareness to practical readiness. Forvis Mazars can assist organizations with:
- Gauging current SAC development processes and supporting methodologies
- Assessing the availability and reliability of historical cost and organ volume data
- Evaluating cost allocation practices and alignment with Medicare reasonable cost principles
- Identifying documentation gaps before MAC review becomes a more significant part of the reimbursement process
- Creating tools and processes to help monitor cost per organ throughout the year
- Supporting quarterly SAC adjustment requests when appropriate
- Strengthening internal controls surrounding cost report preparation and reimbursement reporting
- Evaluating current internal policies related to marketing, public relations, and employee travel expenses for alignment with Medicare cost and reimbursement requirements
By taking a proactive approach now, OPOs can be better prepared to manage cash flow, support reimbursement positions, and respond to future MAC questions or audit requests. If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.
- 1“FY 2027 IPPS Final Rule Home Page,” cms.gov, August 4, 2026.