Nurses Have Never Had Their Own Medicare Payment Designation. Software May Get One First

Part of Nurse.org’s Nursing AI Watch, our ongoing investigation into how artificial intelligence is reshaping nursing practice. Last week we covered the AMA’s proposed CMAA billing codes. This piece covers what CMS just proposed: giving clinical software its own named place in the payment system, while nursing stays folded into the facility charge.

Last week, we reported that the American Medical Association is developing billing codes that would describe clinical work performed entirely by AI. That was about the language of billing: the codes that name what can be charged for.

This is about the bill itself, and who shows up on it. The Centers for Medicare & Medicaid Services (CMS), the federal agency that decides what Medicare pays, wants to give clinical software its own recognized category in Medicare’s payment system. The proposal is called Software as a Medical Service, or SaMS, and the simplest way to picture it is this: software that analyzes patient data would get its own name, its own payment pathway, and its own label in Medicare’s billing system.

Medicare already pays for many of these software services. What’s new is that they would be visible as software, gathered under one name, for the first time. Hospital bedside nursing has no comparable payment designation. On the hospital-stay side of Medicare, nursing has been folded into the hospital’s overall payment, not billed as its own service, for about a century.

Most nurses have heard nothing about the proposal, partly because it doesn’t appear anywhere in CMS’s own summary of the rule. But it’s open for public comment right now, and any nurse can weigh in. 

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Every summer, CMS proposes updates to how Medicare will pay hospitals and clinicians the following year. Two of this year’s proposals matter here.

The first covers hospital outpatient care: the tests, procedures, and visits that don’t involve an overnight stay. For years, CMS has had a problem paying for software, because Medicare’s payment math was built to count things: staff time, supplies, equipment. Software’s value sits in the algorithm, not in anything you can tally on a cost report. After asking the public how to handle this, most recently last year, this proposal is the agency’s first real answer. 

Here’s what it would do, in plain terms:

• Give 36 existing billing codes, mostly for software that analyzes scans, images, and test results, a shared new identity: Software as a Medical Service.
• Move 21 of them into payment groups Medicare reserves for new technology. The rest mostly keep their current arrangements.
• Tag SaMS services that are paid on their own with a new label, “O1,” which marks them as Software as a Medical Service and pays them separately.
• Pull 10 lab analyses done entirely by algorithms out of the lab fee schedule and into this same framework.

CMS calls all of this a first step. Payment amounts are deliberately held close to what they are now while the agency works out a long-term approach, one that could eventually tie payment to patient outcomes.

The second proposal, released July 14, updates how Medicare pays physicians and other clinicians who bill. It doesn’t include a SaMS plan of its own, but it asks the public a question nurses are well placed to answer: how should technology count when Medicare decides what primary care is worth?

Neither proposal is final. Both are open for comment, from anyone.

SaMS means clinical software that analyzes a patient’s information and produces something a care team acts on: a finding, a risk score, a treatment recommendation. Not the scheduling system, not the EHR itself. Software whose output becomes part of the patient’s care. One caveat: not everything in the category is what you’d casually call AI. It also covers older kinds of clinical software, like decision-support and risk-modeling tools.

The examples in the proposal are concrete. Software that reads retina images for disease. Algorithms that detect heart failure from an echocardiogram. Tools that estimate blood flow through the heart’s arteries from a CT scan, score bone fracture risk, assess concussions from eye movement, or map prostate cancer from biopsy images.

Notice the pattern: nearly all of these are diagnostic or risk tools tied to images, lab results, or specialized interpretation. That matters for what comes next.

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Start with what’s not on the list. The AI tools most nurses actually work with are things like deterioration prediction scores, ambient documentation, and virtual nursing platforms, the tools our Nursing AI Watch database tracks across 106 large health systems. None of them appear among the 36 codes, and some may never fit this pathway, because they work more like infrastructure than like a service billed patient by patient.

The deeper point is visibility. Medicare is giving software a distinct identity in the bill: individual codes, a shared name, a clear route through the payment system. Bedside nursing has no equivalent. It shows up in Medicare’s ledger as part of what a hospital costs, not as a service anyone can see, count, or price on its own.

To be fair: these are different corners of Medicare. The SaMS proposal is about outpatient care, and the century-old bundling of nursing into the room charge is mostly a hospital-stay story. CMS is not lifting software out of a room charge and leaving nurses behind. But both point at the same question: as software gets easier and easier to see in the bill, who is making sure the human work of acting on what the software finds, work that in hospitals belongs overwhelmingly to nurses, is just as easy to see? Nursing is one of the largest parts of hospital labor, and it still has no billing identity of its own.

“When nurses say they need help, they’re told there’s no money for more nurses,” said Rebecca Love, a nurse executive and founder of the Commission for Nurse Reimbursement. “But here’s another machine to manage instead. When what we really need is another nurse.”

None of this happened in the dark. CMS raised the software question in public, took comments over several years, and proposed a deliberately cautious first step with payment held steady on purpose. The comment process now underway is the system working as designed. But an open process only hears from the people who comment.

Unlike the AMA’s process, Medicare rulemaking is open to anyone: no registration, no approval, no organizational affiliation. Comments become public record, and CMS is required to consider them before finalizing the rules this fall.

There are two rules, with two deadlines:

• The hospital outpatient rule, where SaMS lives. CMS is asking for input on the proposal itself: how software services should be defined, which services belong in the category, and how they should be paid. Go to the rule’s Federal Register page, click “Submit a Formal Comment,” and reference file code CMS-1850-P. Deadline: August 31, 2026.
• The physician payment rule. CMS is asking how technology should factor into what primary care is worth. Go to the rule’s Federal Register page, click “Submit a Formal Comment,” and reference file code CMS-1848-P. Deadline: September 14, 2026.

What makes a comment count is specificity. CMS weighs substance over volume. A comment that describes what you actually see on your unit, which software tools are in use, what their alerts and outputs ask of you, what nursing work surrounds them, tells the agency something no vendor or hospital association will. If you want the people organizing Medicare’s bill to understand that every software output lands in a human workflow, and that the humans are mostly nurses, this is the venue.

The way Medicare sees software is being redrawn in public, this summer, with the comment box open. Nursing has spent a century waiting to be visible in the bill. As software is written in, nurses can be visible in the public record.

🤔 Medicare is making clinical software visible in the bill, code by code. What would you tell CMS about the nursing work that surrounds those tools on your unit? Tell us in the comments below.

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