What Is the CMS Software as a Medical Service Proposal?
As of August 2026, CMS has proposed a new Medicare payment category called Software as a Medical Service (SaMS) under the CY 2027 OPPS/ASC and Physician Fee Schedule proposed rules. SaMS creates the first standardized reimbursement pathway for AI-powered clinical software, including automated retinal imaging analysis used in ophthalmology. The OPPS/ASC comment deadline is August 31, 2026, and the PFS comment deadline is September 14, 2026.
What it covers: SaMS applies to algorithm-driven software that analyzes patient data and produces a diagnosis, risk score, or treatment recommendation, and CMS specifically lists AI analysis of retina images for disease detection as an example.
Why it matters for billing: CMS is assigning these services a new outpatient status indicator (O1) and moving 36 HCPCS codes into New Technology APCs, which changes how practices bill for and get reimbursed for AI-assisted diagnostics.
Timeline: If finalized, the SaMS payment framework takes effect January 1, 2027, giving ophthalmology practices a narrow preparation window to update chargemasters, train billing staff, and confirm code mappings with AI vendors.
What Changed in the CMS Proposed Rules
On July 2, 2026, CMS released the CY 2027 OPPS/ASC proposed rule (CMS-1850-P), followed by the CY 2027 Physician Fee Schedule proposed rule (CMS-1848-P) on July 14, 2026. Both rules contain a shared proposal to rename the payment category formerly called “Software as a Service” to Software as a Medical Service (SaMS). CMS stated the old label risked confusion with generic cloud-computing terminology used outside healthcare.
The significance goes beyond a label change. CMS is creating a new outpatient status indicator, designated O1, and migrating 36 HCPCS codes into New Technology Ambulatory Payment Classifications under this framework. A companion proposal would shift 10 lab-data algorithms from the Clinical Laboratory Fee Schedule to contractor-priced payments under the PFS. For ophthalmology, the most directly relevant example CMS names is automated retinal imaging analysis for disease detection.
In our experience matching ophthalmology practices with billing partners, technology-related billing changes tend to be the ones that create the largest workflow gaps. Unlike a conversion factor adjustment, which changes a dollar amount, a structural payment category change requires updated chargemasters, new code mappings, and retraining for every biller who touches the claims. Practices that rely on in-house teams often do not learn about these changes until claims start returning unexpected results.
Which Ophthalmology Practices Are Affected?
Any ophthalmology or retina practice that currently uses or plans to adopt AI-based diagnostic tools for clinical decision-making falls within the scope of this proposal. The most immediately affected are practices using autonomous AI systems for diabetic retinopathy screening, which produce a diagnosis without requiring physician interpretation of the images.
The proposed rule also reaches practices that use AI-assisted analysis of OCT scans for macular degeneration progression, glaucoma risk scoring based on retinal nerve fiber layer analysis, and algorithmic screening tools embedded in fundus cameras. Even practices that have not yet adopted these tools should pay attention, because the SaMS framework will shape the economic case for adoption over the next several years.
Hospital-based ophthalmology departments billing under the OPPS will see the most direct impact, since the O1 status indicator and New Technology APC assignments are OPPS-specific. However, the PFS companion proposal affects freestanding practices as well, particularly those billing lab-algorithm codes that CMS is reclassifying from the Clinical Laboratory Fee Schedule. Practice managers and billing teams should confirm with their AI vendors which HCPCS codes are affected and whether their current payer contracts cover the new SaMS designations. For a comprehensive overview of ophthalmology billing and coding guidelines, including modifier and documentation requirements, the linked resource provides a detailed reference.
Why CMS Is Building This Framework Now
The timing is not arbitrary. The FDA has cleared over 800 AI-enabled medical devices, with ophthalmology and radiology leading in clinical adoption. However, Medicare reimbursement has lagged behind FDA approval, forcing practices into a fragmented system where some AI tools receive separate payment, others are bundled into existing procedure codes, and many receive only contractor-priced reimbursement that varies by region.
CMS explicitly stated in the proposed rule that it has been evaluating a comprehensive approach to SaMS payment for several years and views this proposal as an interim step for 2027 while it develops a longer-term outcomes-based payment framework. The agency’s rationale is that AI-driven analyses do not require a CLIA-certified laboratory to perform once the underlying test results or images have been produced, which creates a category mismatch under the existing payment structure.
For ophthalmology specifically, this matters because autonomous AI retinal screening systems have been commercially available since 2018, but inconsistent Medicare payment has slowed adoption in exactly the practice settings where they would have the highest clinical impact, particularly primary care and optometry referral networks that could screen diabetic patients and refer confirmed positives to ophthalmologists. A standardized payment framework could accelerate that referral pipeline.
How Does the SaMS Payment Framework Work in Practice?
Under the proposal, SaMS services would receive separate payment under the OPPS and would not be subject to multiple-procedure discounting. CMS proposes that O1-designated services will pay similarly to Status Indicator S, meaning each service receives its own full payment when furnished alongside other procedures.
The following table compares how AI diagnostic services have been billed historically versus how they would be billed under the proposed SaMS framework:
| Billing Element | Current System | Proposed SaMS (CY 2027) |
|---|---|---|
| Payment category | Varies: procedure code, lab code, or contractor-priced | Unified SaMS category under O1 status indicator |
| Payment mechanism | Bundled, packaged, or MAC-priced by region | New Technology APC with national rate |
| Multiple procedure discount | May apply depending on code pairing | Not subject to discounting |
| Lab algorithm handling | Clinical Laboratory Fee Schedule | Contractor-priced under PFS (for 10 reclassified codes) |
| Chargemaster requirement | Existing CPT/HCPCS code | Same HCPCS codes, new APC assignment |
One question we hear constantly from practice managers is whether AI tools will actually pay enough to justify the subscription cost. The SaMS framework does not answer that question definitively for 2027 because the New Technology APC rates are still being calculated. However, separate payment without discounting is a structural improvement over the current system, where many AI analyses are either bundled into the underlying imaging code (producing zero incremental revenue) or priced inconsistently across Medicare Administrative Contractors. For practices already tracking revenue cycle management performance, this is a metric worth modeling before the final rule is published.
Understanding how the SaMS framework will affect your practice’s billing workflow starts with a clear picture of your current coding and reimbursement structure. Connect with an ophthalmology billing partner who tracks regulatory changes and can help you prepare before January 2027.
How to Prepare Your Billing Workflow for SaMS
Practices that act before the final rule is published in late 2026 will be in the strongest position. Here are the steps to take now:
- Audit your current AI diagnostic inventory. Identify every software tool in your practice that produces a clinical finding, risk score, or diagnostic recommendation from patient data. Cross-reference the associated HCPCS codes against the 36 codes CMS has proposed for SaMS reclassification.
- Contact your AI vendors. Ask each vendor to confirm whether their product’s billing codes are included in the SaMS proposal and whether they anticipate any code changes, descriptor updates, or new billing documentation requirements.
- Update your chargemaster proactively. Once the final rule is published, practices will need to update APC assignments for all affected codes. Build the chargemaster update into your Q4 2026 compliance workflow rather than waiting for January.
- Review your payer contracts. Medicare Advantage plans and commercial payers do not automatically follow OPPS payment changes. Confirm with each payer whether SaMS codes will receive separate payment or remain bundled under their reimbursement methodology.
- Train billing staff on the O1 status indicator. The O1 designation is new for 2027. Billing staff need to understand which claims qualify, how to verify correct APC assignment, and how to appeal if a SaMS service is incorrectly bundled or denied.
- Submit comments to CMS. The OPPS/ASC comment period closes August 31, 2026, and the PFS comment period closes September 14, 2026. Practices and billing companies that submit data-driven comments help shape the final payment rates.
Common Misreadings of This Proposal
The most frequent misunderstanding we see from providers is the assumption that SaMS means CMS is now paying for all AI tools. That is not what this proposal does. SaMS covers a defined set of 36 HCPCS codes for algorithm-driven analyses that are already recognized by Medicare but have been paid inconsistently. It does not create a new pathway for AI tools that have not yet received a HCPCS code or FDA clearance.
A second misreading is that SaMS automatically increases reimbursement. The proposal changes the payment structure, not necessarily the payment amount. Some services currently receiving contractor-priced payments above the proposed APC rate could see a decrease under the standardized national rate. Practices should model the financial impact based on their current MAC-priced reimbursements rather than assuming the change is uniformly positive.
Third, the SaMS proposal is explicitly labeled as interim for CY 2027. CMS has signaled that it intends to develop an outcomes-based payment framework in future rulemaking. Practices and billing companies should treat the 2027 structure as a planning baseline, not a permanent arrangement. Across the billing companies we vet, the most effective partners are already building regulatory tracking into their service agreements so practices do not miss these transitions. For practices evaluating whether to manage AI billing in-house or work with a specialized partner, the CPT 92134 billing guide illustrates the level of code-specific detail required for ophthalmology diagnostic imaging, and SaMS adds another layer on top of that.
In-House Billing vs. Outsourced for AI Diagnostic Claims
AI diagnostic billing introduces a complexity layer that most general billing teams are not staffed to manage. The issues are not just coding accuracy but regulatory tracking: knowing when CMS reclassifies a code, when a MAC changes its local pricing, and when a new NCCI edit pairs an AI analysis with the underlying imaging code.
Practices that manage billing in-house will need to assign someone to monitor MLN Connects, the Federal Register, and their MAC bulletins specifically for SaMS-related updates. For a single-provider practice, that monitoring cost may exceed the cost of outsourcing to a billing company that already tracks these changes across a portfolio of ophthalmology clients.
Providers often come to us after a payment disruption they did not anticipate, whether it is a bundling edit that zeroed out an AI analysis payment or a MAC repricing that dropped reimbursement below cost. The billing companies in our network that specialize in ophthalmology already have regulatory tracking workflows for exactly this category of change. The question is not whether to prepare for SaMS but whether your current billing setup is designed to absorb this kind of structural shift without losing revenue during the transition.
Frequently Asked Questions
SaMS stands for Software as a Medical Service. CMS proposed this term in the CY 2027 OPPS/ASC and PFS proposed rules to describe algorithm-driven clinical software that analyzes patient data and produces a diagnosis, risk score, or treatment recommendation.
It depends on whether the OCT analysis software has its own HCPCS code and is included in the 36 codes CMS listed for SaMS reclassification. AI-enhanced OCT analysis tools that produce autonomous clinical findings are within scope, but standard OCT imaging billed under CPT 92134 is not reclassified.
If finalized as proposed, SaMS takes effect January 1, 2027. The CY 2027 OPPS/ASC comment period closes August 31, 2026, and the PFS comment period closes September 14, 2026. CMS is expected to publish the final rule in late October or November 2026.
The financial impact varies by practice. Services currently receiving higher-than-average contractor-priced payments from their MAC could see a reduction under a standardized national rate. Services that were previously bundled or packaged with no separate payment may see an increase. Practices should model the impact using their current payment data.
Not automatically. Medicare Advantage plans and commercial payers set their own reimbursement policies. Some follow OPPS payment changes closely, while others maintain independent fee schedules. Practices should confirm coverage and payment terms with each payer individually.
No. The RAPID pathway, announced in April 2026, accelerates Medicare coverage decisions for FDA Breakthrough Devices. SaMS addresses how already-covered AI services are paid, not whether they are covered. The two policies are complementary but distinct.
ASCs billing under the ASC Payment System will see the same SaMS code reclassifications as hospital outpatient departments. The O1 status indicator and New Technology APC assignments apply across both settings, so ASC-based ophthalmology practices using AI diagnostic tools should update their billing workflows accordingly.
Next Steps
Review the CMS-1850-P proposed rule fact sheet at cms.gov to identify which HCPCS codes your practice currently bills that are included in the SaMS reclassification.
Contact your AI diagnostic vendors before October 2026 to confirm their billing guidance and code mapping plans for the new payment framework.
If your billing team is not currently equipped to track structural CMS payment changes, connect with a billing partner who specializes in ophthalmology to bridge the gap before January 2027.
Regulatory changes to AI diagnostic billing are coming in 2027. Get matched with a vetted ophthalmology billing company that tracks CMS payment frameworks and can ensure your practice is prepared from day one.
