Data analysis that drives business outcomes: Strategic advocacy protects access to complex nerve repair

The challenge

Every year, the Centers for Medicare & Medicaid Services (CMS) recalibrates how Medicare pays for outpatient hospital services. For hospitals and device manufacturers who depend on the revenue generated by these procedures, and for patients who need access to them, even a small adjustment to payment rates can carry enormous implications.

That was the case when CMS proposed a staggering 27% cut in the Medicare payment rate for a particular high-cost, complex nerve repair procedure. The significant decrease threatened both provider reimbursements and the economic viability of continuing to offer the procedure at all.

A device manufacturer recognized the seriousness of the issue and turned to McDermott+ for guidance. Through a data-driven advocacy strategy, M+ was able to help the device manufacturer convince CMS to nix their proposed payment rate reduction and instead finalize a 40% payment rate increase for the procedure.

Our analysis

The M+ team conducted a detailed analysis of CMS claims and cost data underlying the proposed payment rate cut for the nerve repair procedure to identify the root cause of the reduction.

We found that CMS had proposed a new complexity adjustment to map to the same ambulatory payment classification (known as an APC) used by the nerve repair procedure in question. This proposed complexity adjustment significantly reduced the geometric mean cost for the APC.

As a result, the proposed payment rate no longer accurately reflected the resource intensity of the highest-cost nerve repair procedures, including the one we were investigating.

Strategic approach

Based on these findings, M+ moved on multiple fronts simultaneously, building a data-driven case, developing stakeholder comment letters, and preparing for a meeting with CMS staff. Specifically, that approach included:

1. Identifying which procedure codes should map to a new APC proposed by stakeholders. We confirmed that the changes would not violate CMS’s “two-times rule” and would preserve payment stability for APCs within the nerve repair family. We also estimated the change in revenue to providers and Medicare from the recommended policy change.

2. Drafting comment letters. We developed a comment letter for the device manufacturer client and supported relevant stakeholders in their development of comment letters to propose that CMS create a new APC for high-cost nerve repair procedures.

3. Meeting with CMS. We met with CMS to discuss payment adequacy concerns related to the existing APC structure for nerve repair codes and our suggested policy solution.

The outcome

CMS agreed with our recommendation to create a new APC for complex nerve repair procedures (Level 3 Nerve Repair). Our recommendation – and CMS’s acceptance of it – led to a finalized Medicare FFS payment rate of $8,966 for 2026.

That represented a 92% increase from the proposed rate of $4,670, and a 40% increase from the prior year payment rate of $6,404, for these procedures – a vast improvement over the drastic proposed payment rate reduction stakeholders had faced prior to our intervention.

Proposed changes to Medicare payments are not inevitable. As hospital billing practices evolve, these changes can have an impact on how Medicare sets prices for outpatient hospital services. A proposed 27% reduction can become a 40% increase from the prior year – but only for those who are watching closely and acting early.

M+ can help device manufacturers be proactive by monitoring Medicare claims data to track hospital billing practices, think through potential policy changes that CMS is likely to accept, and supporting advocacy efforts to promote payment adequacy.