CMS issued an Advance Notice of Proposed Rulemaking on January 29, 2026 soliciting public input on how to incentivize Medicare participating hospitals’ participation in buying PPE and essential medicines from domestic manufacturers. CMS is seeking feedback about creating a “Secure American Medical Supplies” designation that hospitals could earn by committing to procuring supplies from domestic manufacturers. CMS is also seeking input about a change to the Hospital Inpatient Quality Report (IQR) Program that would add a structural quality measure that would encourage hospitals to commit to buying domestic products. CMS is also open to other suggestions for making the domestic supply chain more resilient.
In the wake of the COVID-19 pandemic’s PPE shortages for healthcare workers and hospitals reporting perpetual drug shortages that last on average 18 months, CMS is soliciting public input on how CMS can work with Medicare participating hospitals to encourage domestic procurement of PPE and essential medicines. Previously, CMS has adjusted payments to Medicare participating hospitals to offset costs of domestically procuring N95 respirators when hospitals track and report on their cost reports domestic and foreign-procured respirators. However, very few hospitals have reported the information necessary to take advantage of this payment adjustment. CMS has also established a separate payment to small, independent hospitals who establish a buffer stock of essential medicines.
“Secure American Medical Supplies” Friendly Hospital Designation
CMS is seeking feedback on adding a “Secure American Medical Supplies” friendly hospital designation that would be displayed on a public website. CMS proposes having a program where Medicare participating hospitals could earn the designation by procuring a certain percentage of either total American-made PPE and essential medicines or sub-categories of American-made PPE and essential medicines. CMS is considering using the definition of essential medicines as the 86 medicines designated in the Essential Medicines Supply Chain and Manufacturing Resilience Assessment report and that PPE would include items such as surgical masks, gowns, face shields, and filters as set forth in section 70953 of the Infrastructure Investment and Jobs Act (Pub. L. 117–58). CMS is seeking input on how to classify whether the PPE and essential medicines are American made for purposes of this program. CMS is also considering having hospitals initially attest to meeting the criteria of the program on their cost reports, but is seeking input on alternative ways to implement a potential program.
Potential Payment to “Secure American Medical Supplies” Friendly Hospitals
CMS is also seeking input on how to offset the cost of procuring PPE and essential medicines from domestic sources. One potential option that CMS is considering is assuming that a certain percentage of a hospital’s total drug costs on its cost report data is for higher cost domestic essential medicines. Another non-budget neutral option under consideration is paying hospitals a lump sum either at the time of a cost report settlement or on a more regular, bi-weekly cadence to be reconciled later. CMS is also soliciting feedback on whether it would be beneficial to expand a potential payment program to other entities such as physicians who receive Medicare payments but do not submit cost reports.
Hospital IQR Measure
CMS is seeking feedback on adding a “yes” or “no” question to the IQR Program asking hospitals whether they have met a minimum percentage threshold of American-made PPE and essentials or asking hospitals to answer the same question but on a categorical-basis. CMS is asking for public input on whether this type of program would be an appropriate way to incentivize hospitals to buy American-made products and whether there are any good alternative options to the proposed attestation option.
Comments are due on March 30, 2026.
