Docket CMS-1848-P · 91 FR 43842 · published July 16, 2026 · proposed rule
Comment deadline: September 14, 2026. Read the proposed rule →
Two things happen to algorithm-driven diagnostics in the CY2027 Physician Fee Schedule proposed rule. One is a name change. The other moves money.
The name change, and why it is not cosmetic
CMS proposes to retire the term it has used for algorithm-driven clinical software, Software as a Service (SaaS), in favor of Software as a Medical Service (SaMS): software-based technologies that support clinical decision-making through algorithmic analysis. The stated reason is that “SaaS” is closely associated with general cloud computing outside health care.
A rename is not a reimbursement event by itself. It matters because it is the label CMS is now organizing a payment framework around, and because the same terminology appears in the parallel hospital outpatient proposed rule (CMS-1850-P, 91 FR 41803, published July 7, 2026). If your diligence notes, data room or investor materials describe a product as “SaaS” in a Medicare payment context, that language is now one cycle behind the agency.
The part that moves money
CMS proposes to take ten HCPCS codes that are currently payable under the Clinical Laboratory Fee Schedule and contractor-price them under the Physician Fee Schedule instead. The codes are the ones the agency identified as describing a computer analysis with no laboratory method in the descriptor — secondary algorithmic analyses run on data a laboratory already produced.
The reasoning is worth reading closely, because it is an argument about what these products are:
In CMS’s reading, the original sequencing must be performed by a CLIA-certified laboratory, but the downstream algorithmic analysis of that data can be performed by any entity with the necessary software.
In its CY 2027 proposals, CMS takes the position that these secondary analyses are “other diagnostic tests” under section 1861(s)(3) of the Social Security Act rather than clinical diagnostic laboratory tests. The genomic example is the clearest version: the sequencing happens once, in a CLIA-certified laboratory, and the algorithmic analysis of that sequence can then be run again by any entity with the software.
What changes in a diligence read
We do not forecast what a company will earn, and nothing here predicts whether this proposal survives to a final rule. What it does is change several inputs a model has to carry.
The rate stops being published. CLFS rates are set by a defined methodology and are visible in advance. Contractor pricing is determined by the Medicare Administrative Contractor, which means the number is no longer something an analyst can look up before the fact, and it can differ by jurisdiction. A revenue model built on a known CLFS rate is being asked to carry a variable it previously did not have.
Cost-sharing and budget neutrality arrive. The rule notes CLFS tests are not subject to beneficiary cost-sharing or budget neutrality. PFS services are. That is a different demand-side and rate-setting environment, and it is a stated reason CMS gives for the change.
The CLIA argument cuts at a moat, not just a rate. If the agency’s reading holds, the analysis step does not require a certified laboratory. Where a company’s defensibility rested partly on operating a CLIA-certified lab, this is the federal payer saying that certification is not what the analysis requires. Whether that matters depends entirely on where the specific product’s protection actually sits — which is a question about its patents, its data and its contracts, not about this rule.
There is a hospital-side mirror. The parallel OPPS proposed rule (CMS-1850-P, 91 FR 41803) proposes assigning the same analyses to New Technology APCs. A company selling into both settings is looking at two different payment mechanics for one product.
The questions this makes answerable
The useful move is not to conclude anything about a company. It is to check the record:
- Does the company bill any of the ten codes listed in the proposed rule, or a code whose descriptor is a computer analysis with no laboratory method?
- If it does, what share of revenue sits on those codes, and does the model assume a published CLFS rate?
- Does the company hold CLIA certification, and is that certification load-bearing for the analysis step or only for an upstream assay it also performs?
- Did the company file a comment by the September 14, 2026 deadline? A position taken on the record is a fact about how it reads its own exposure.
- For a portfolio: how many holdings sit in the algorithmic-diagnostics space at all? That is a count, and it is checkable today.
None of those questions requires a forecast. All of them are answerable from the public record, and the answers are inputs a valuation should already contain.
The dates that matter
The comment deadline for CMS-1848-P is September 14, 2026. The proposed rule was published July 16, 2026 at 91 FR 43842. This is a proposal; a final rule typically follows in the fall, with most policies taking effect January 1, and proposals do change between the two. The exposure is real now; the outcome is not settled.
The regulatory citations in this piece refer to the proposed rules published in the Federal Register at 91 FR 43842 (physician fee schedule) and 91 FR 41803 (hospital outpatient); CMS’s positions are summarized from those rules. We do not predict outcomes; we assemble what the public record already contains so that a reader can check it.
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