The Breakthrough Reimbursement Shortcut Didn't Disappear. It Got a Deadline.
By: N. Adam Brown, MD, MBA, Steven Farmer, MD, PhD, and Marion Bequin, DVM
Coverage of CMS's FY2027 inpatient payment rule suggests the agency repealed the shortcut that allowed FDA Breakthrough Devices to collect extra Medicare payments if they could prove the device worked better than existing options.
But that is not quite what the rule does, and if you only read the headlines instead of the actual rule, you’ll make the wrong call this quarter. Before explaining what the rule does, let’s examine why the mechanics matter here.
New technology add-on payments (NTAP) exist because Medicare pays hospitals a fixed amount per case. This structure, of course, gives hospitals a financial reason NOT to adopt a treatment that costs more than the payment covers. NTAP supplies a temporary supplement, generally across two to three years, capped at 65 percent of the technology's cost. Qualifying traditionally has three requirements. The technology must: 1)be new; 2) be costly enough that standard payment falls short; and 3) demonstrate substantial clinical improvement over what already exists.
That third test is the toughest, and since the FY2020 and FY2021 rules, Breakthrough-designated devices have been exempt from demonstrating substantial clinical improvement.
Initially, CMS proposed to end that exemption for all FY2028 applications, but the final rule is narrower. In the rule's own words, the final rule was modified “to grandfather eligibility under the alternative pathway for certain technologies for a limited period of time."
The important language sits in the amended 42 CFR 412.87(c), which takes effect October 1, 2026. Until then the online CFR still displays the prior version, so check the rule's regulatory text rather than the code. The alternative pathway remains available for applications for fiscal years 2021 through 2029, inclusive, for a device that has received Breakthrough Device designation as of September 30, 2026, and has received marketing authorization for the designated indication by May 1, 2028.
In other words, there are two deadlines, and they are doing different work.
The September 30, 2026 deadline will determine whether you qualify. Hold a breakthrough designation by that date, and you keep the pathway option open. Receive one on October 1, and the window has shut. There is no transition and no second window.
The May 1, 2028 deadline decides whether being in the program will actually result in payment. Grandfathered devices still have to reach FDA marketing authorization for the designated indication by then.
The outpatient side uses the same September 30, 2026 designation cutoff, with device pass-through eligibility running through calendar year 2029 under the amended §419.66. CMS explained the softening directly, saying the modifications address "the need for support for technologies already in advanced stages of commercial development."
What CMS DID NOT do is preserve the incentive going forward. For six years, a Breakthrough designation carried an implicit reimbursement option. With this rule, that option expires. After September 30, the designation reverts to what it was designed to be: a faster, more collaborative FDA review for a technology addressing a serious condition. It stops being a payment strategy. Any financial model or investor deck still treating "we have Breakthrough designation" as shorthand for "we have a guaranteed reimbursement path" is wrong.
Anti-infective developers should note a separate change. CMS removed the conditional approval process for antimicrobial products. Beginning with FY2028 applications, every applicant needs FDA marketing authorization by May 1 of the prior year. The July 1 conditional route is gone.
Given the realities of the rule, here is a roadmap for what is ahead:
IMMEDIATELY Establish which side of September 30 you are on. Designation in hand means you are grandfathered. A pending request at FDA is now a timing question with money attached.
If grandfathered, work backward from May 1, 2028. May 1 is your binding constraint, and it should drive FDA submission sequencing rather than follow from it.
If you are not grandfathered in, build the substantial clinical improvement case before authorization. Ensure endpoints, comparators, and health economic outcomes chosen with CMS and payers are in view from the start, not retrofitted from an FDA submission.
"Designations buy speed to market. They do not buy speed to payment. The alternative pathway blurred those two elements for six years. September 30 is when the blur clears."
Adam Brown, MD, MBA is a physician, healthcare executive, and business professor. He is the founder and managing partner of ABIG Health, a Washington, D.C.-based healthcare strategy firm.
Dr. Steven Farmer, MD, PhD is a Senior Partner at ABIG Health, a practicing cardiologist, and a nationally recognized expert in healthcare policy and real-world evidence who previously served as Chief Strategy Officer for Coverage at the Centers for Medicare & Medicaid Services.
Marion Bequin, DVM is an intern at ABIG Health, where she supports market access and commercialization efforts for biopharmaceutical and medical device firms. A veterinarian with international experience and a master's candidate at ESCP , she applies scientific reasoning and structured problem-solving to turn scientific and clinical data into clear, actionable recommendations.
