A New Made In America Push For Hospitals : CMS Seeks Input On Domestic Sourcing For PPE And Essential Medicines

mondaq.com · Feb 19, 2026 · Collected from GDELT

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James W. Kim’s articles from Polsinelli LLP are most popular: within Food, Drugs, Healthcare and Life Sciences topic(s) in United States Polsinelli LLP are most popular: within Food, Drugs, Healthcare, Life Sciences, Privacy and International Law topic(s) Key Takeaways CMS is seeking input by March 30 on a proposed framework to promote U.S.-made PPE and essential medicines in Medicare-participating hospitals. The proposal could extend federal-style sourcing requirements to hospital systems outside traditional procurement channels. Hospitals, suppliers and distributors should evaluate current sourcing practices and prepare for enhanced documentation or compliance obligations. The Centers for Medicare & Medicaid Services (CMS) recently issued an Advance Notice of Proposed Rulemaking (ANPRM) soliciting feedback on options to encourage Medicare-participating hospitals to procure U.S.-manufactured personal protective equipment (PPE) and essential medicines. In issuing its Jan. 29, 2026 notice, CMS has signaled that hospital purchasing may become the next major lever for the "Made in America" policy, with potential downstream impacts for suppliers, compliance representations and contracting strategies well beyond traditional federal procurement channels. CMS Seeks Early Input on 'Made in America' Framework for Hospitals CMS' decision to issue an ANPRM in lieu of a Notice of Proposed Rulemaking (NPRM) presents a unique opportunity for providers and other stakeholders to provide input that would help to inform and potentially shape CMS' final policy and rulemaking. While an NPRM is an official part of the Administrative Procedures Act (APA) rulemaking process and proposes specific regulatory changes for public comment, an ANPRM instead provides an opportunity for CMS to gather stakeholder input before developing a detailed proposed rule. If CMS, after reviewing the comments from the ANPRM, decides to proceed with the proposal to push hospitals to procure domestically made PPE and medicines, CMS will need to issue an NPRM before issuing a final rule. CMS describes three possible policy paths in the ANPRM: A "Secure American Medical Supplies"-friendly hospital designation for hospitals that meet specified domestic procurement thresholds for PPE and essential medicines; Potential Medicare payment approaches to recognize incremental costs for hospitals that earn the designation (including concepts tied to IPPS/OPPS frameworks); and A potential Hospital Inpatient Quality Reporting (IQR) Program structural measure based on meeting domestic procurement minimum percentages, consistent with the Secure American Medical Supplies designation. What CMS Means by "PPE," "Essential Medicines" and "Made in America" CMS defines PPE with respect to the ANPRM consistent with section 70953 of the Infrastructure Investment and Jobs Act (IIJA). This includes items such as surgical masks, respirators and required filters, face shields/protective eyewear, gloves and disposable/reusable surgical and isolation gowns, as well as head and foot coverings and other gear or clothing used to protect an individual from the transmission of disease. In its ANPRM, CMS specifically asks whether the "Make PPE in America" domestic content requirements in IIJA section 70953 would be an appropriate framework for determining whether covered PPE is "wholly made" in the U.S., noting those statutory requirements already apply to PPE procurement by the U.S. Departments of Health and Human Services (HHS), Veterans Affairs (VA) and Homeland Security (DHS) and would require procuring PPE (including its materials and components) that is grown, reprocessed, reused or produced in the United States. For essential medicines, CMS points to the 86 medicines prioritized in the HHS May 2022 Essential Medicines Supply Chain and Manufacturing Resilience Assessment (and any revisions to that list). CMS is also requesting comment on a potential domestic manufacturing standard — for example, treating a medicine as "fully domestic" if more than 50% of the active pharmaceutical ingredient (API) and the entire final dosage form (excluding certain components such as syringes or intravenous (IV) bags) are manufactured in the United States. CMS Signals a Federal Procurement Lens for Hospital Sourcing CMS is signaling a potential shift toward using federal acquisition frameworks to define acceptable sourcing thresholds for PPE and essential medicines, even in contexts outside traditional government contracting. CMS is considering relying on a list of "critical components" and "critical items" as defined in the Federal Acquisition Regulation (FAR) at FAR 25.003 and is potentially using the list at FAR 25.105 (48 C.F.R. § 25.105), which is currently being developed pursuant to Executive Order 14005 and related rulemaking. CMS acknowledges the list is forthcoming at the time of the ANPRM but frames it as a potential way to define what PPE and essential medicines would be within its scope. Suppliers Should Prepare for Compliance and Contracting Shifts For suppliers that sell into (or alongside) VA channels, CMS is evaluating "Made in America" concepts that look more like domestic content and manufacturing-location tests than the "country of origin" representations that suppliers may be used to making under other procurement regimes. If CMS establishes final rules based on these concepts through public designation criteria, hospital systems, distributors and group purchasing organizations (GPOs) will be required to materially revise current contracting approaches with applicable product manufacturers to include detailed sourcing substantiation in commercial supply chains, certifications of compliance with country of origin requirements and audit-ready documentation that resemble (or are benchmarked to) familiar federal procurement standards. Consultants and third-party auditors will also need to develop significant new expertise to verify certifications by manufacturers of compliance with any such requirements. Medicare Reimbursement Considerations CMS acknowledges in the ANPRM that domestically manufactured PPE and essential medicines generally cost more than foreign-made equivalents. To help offset the additional resource costs that hospitals would incur, CMS contemplates a separate payment under the Inpatient Prospective Payment (IPPS) to hospitals that earn the "Secure American Medical Supplies" designation. Specifically, these hospitals could receive 1) a lump-sum payment at cost report settlement, in which Medicare could make a lump-sum payment for Medicare's IPPS share of the additional cost using cost report data; or 2) biweekly interim lump-sum payments, in which CMS could make advance payments in 26 equal installments over the year, which would be reconciled at settlement with Medicare Administrative Contractor (MAC) review. Both payment mechanisms would rely on reasonable cost principles and MAC determinations consistent with existing Medicare rules. CMS also discussed the potential for a non-budget neutral payment under Social Security Act Section 1886(d)(5)(I), in which CMS would explore providing additional funding for additional costs to the designated hospitals rather than redistributing existing IPPS dollars. Finally, CMS is considering adding a structural measure to the IQR Program that would require hospitals to attest to meeting minimum percentages of domestically manufactured PPE and essential medicines in their procurement. CMS is seeking comments on all of these proposals. While CMS' suggested separate payment may potentially generate additional revenue for designated hospitals, there are some operational and compliance implications that providers should consider. To receive proposed payment, hospitals would need to understand which products meet CMS' definition of "domestic" and have a robust and efficient tracking system in place to identify and quantify procurement volumes for domestically manufactured PPE and essential medicines and unit costs per product, as well as how these costs map to the CMS cost report. In addition, with CMS signaling it would only reimburse the Medicare share of the IPPS payment, it is unclear whether the Medicare portion would account for all the additional cost to providers for procuring domestically. Finally, designated hospitals should anticipate continued validation of cost report submissions by the MACs and be prepared to address any potential overpayment or underpayment risks with supporting documentation during reconciliation at settlement. Deadline to Weigh In on Domestic Procurement Rules Is March 30 Comments on the ANPRM are due March 30, 2026. Hospitals, suppliers, group purchasing organizations and related stakeholders should consider weighing in on feasibility, compliance burden and unintended consequences before CMS codifies requirements into formal rulemaking. CMS specifically solicits comments on the following questions: Potential Establishment of a Publicly Reported Hospital Designation Reflecting Medicare Participating Hospitals' Commitment To Procuring Domestic PPE and Essential Medicines Would a "Secure American Medical Supplies" friendly hospital designation be an appropriate way to facilitate the creation of streamlined payment policies to bolster the domestic supply chain through the recognition of the additional resource costs hospitals incur when procuring domestically manufactured items? Where would it be most helpful for this designation to appear? What would be the most appropriate entity to grant this designation? What other ways might be effective? For administering the designation, what are potentially useful alternatives to self-attestation? How could hospitals be asked to provide proof that they purchased from domestic suppliers? Could hospital accreditors, group purchasing organizations (GPOs) or some other entity be better positioned to administer oversight of the designation? What is the most appropriate