CPT Appendix S: The Missing Link Between AI Innovation & Reimbursement

By Richard Frank, MD, PhD, Founder and Principal Consultant, Frank Healthcare Advisors

November 28th 2025

AI-enabled medical devices, once seen as futuristic, are now routinely cleared by FDA to detect retinal disease, analyze cardiovascular physiology, classify imaging features, and autonomously interpret clinical signals. Yet despite rapid technological progress, commercial adoption for many AI solutions remains difficult. Innovators often underestimate one of the biggest barriers to real-world use: reimbursement.

Without clear CPT coding and predictable payment, even breakthrough AI/ML systems struggle to scale. To solve this disconnect, the American Medical Association (AMA) formed an AI expertise workgroup that developed the Taxonomy of Artificial Intelligence for Medical Services and Procedures, which became AMA Digital Medicine Panel CPT Appendix S - AI Taxonomy for Medical Services and Procedures. Made effective in 2022, the taxonomy establishes a consistent, evidence-driven framework that characterizes the “work done by machines” and aligns AI technologies with accurate code descriptors, valuation, and payer expectations.

For innovators, Appendix S is not just a coding reference. It is a strategic tool that can significantly improve market access and commercial success—when applied early and intentionally.

Why Appendix S Matters for AI Innovators

AI devices historically struggled to fit into the CPT system. Many did not align with legacy coding concepts, leaving payers without a clear way to cover services performed partly, or entirely, by software. Some innovators relied on Category III codes with limited reimbursement; others tried to fit advanced AI into outdated imaging or analysis codes that did not reflect their value.

Appendix S changes this landscape by:

• creating a uniform language for describing AI functionality,

• enabling discrete and differentiable code descriptors,

• linking regulatory labeling, clinical evidence, and CPT language,

• clarifying physician vs. machine work, and

• facilitating more predictable valuation and coverage pathways.

For companies developing AI-enabled diagnostics, imaging tools, or predictive analytics, Appendix S is the missing bridge between innovation and adoption.

Understanding the Three AI Categories and Why They Matter for Reimbursement

Appendix S classifies AI medical services into three types:

1. Assistive

• Detects clinically relevant data

• Does not interpret, quantify, or diagnose

2. Augmentative

• Provides clinically meaningful analysis or quantification

• Still requires physician interpretation

3. Autonomous

• Independently interprets data

• Generates a clinically meaningful conclusion without concurrent physician involvement

These categories map directly to coding, valuation, and payer expectations. Understanding where your device fits is essential for choosing the correct commercialization approach.

How Innovators Can Use Appendix S to Improve Market Access

Below are the strategic ways Appendix S can support faster commercialization, stronger reimbursement, and better payer alignment.

1. Build Your Regulatory Strategy Around Appendix S Terminology

FDA labeling is one of the most influential sources for CPT applications. Appendix S reinforces that descriptors should consistently reflect the device’s intended use, clinical output, and level of autonomy.

Appendix S was used to revise real CPT language, such as changing code 92229 from “automated” to “autonomous” for the retinal diagnostic system—establishing the first autonomous diagnostic CPT precedent.

How innovators benefit:

• Use the taxonomy’s definitions during early product conceptualization.

• Ensure FDA interactions describe the algorithm using Appendix S–aligned language.

• Position the product’s role directly within the labeling.

Impact: A regulatory foundation that seamlessly translates into CPT code eligibility and stronger payer acceptance.

2. Use the Taxonomy to Design the Right Clinical Evidence Package

Appendix S emphasizes that CPT codes rely on clinical evidence showing the meaningfulness of the device’s output. Evidence expectations vary by AI category:

Assistive

• Demonstrate clinical relevance

• Provide correlation evidence

Augmentative

• Demonstrate quantitative accuracy

• Show clinical meaningfulness

  • Example: FFRCT validation against invasive FFR

Autonomous

• Diagnostic performance metrics

• Evidence of independent machine conclusions

• Workflow studies showing autonomy

Impact: Evidence aligned with Appendix S avoids gaps that can derail CCA submissions, coverage determinations, or payer negotiations.

3. Use Appendix S to Determine Whether a Category I or III Code Is Best

Appendix S applies to both emerging and established services.

Strategic considerations:

• Assistive AI → often Category III

• Augmentative AI → Category I once evidence + use increase

• Autonomous AI → may justify Category I earlier (ex: 92229)

Impact: Stronger alignment between commercialization timing and revenue modeling.

4. Strengthen Your CPT Code Change Application (CCA)

The CPT Editorial Panel now expects Appendix S–aligned justification in AI CCAs.

Applications must clearly articulate:

• The AI category

• Machine vs. physician work

• Why existing codes are insufficient

• Evidence supporting the claimed level of autonomy/analysis

Impact: Higher success likelihood for Category I or III codes that accurately capture value.

5. Align Your Business Model With the Role of the AI Output

Different AI categories lend themselves to different pricing and reimbursement models.

Assistive

• Often add-on or bundled

• Good for SaaS models

Augmentative

• Often tied to imaging codes

• Potential for standalone reimbursement

Autonomous

• Highest reimbursement potential

• Supports per-exam billing

Impact: Better revenue forecasting and adoption strategies.

6. Improve Payer Communication and Coverage Strategy

Appendix S provides a structured framework to explain:

• what the algorithm does,

• how it contributes to patient care,

• why it warrants reimbursement.

Impact:

• Faster coverage decisions

• Fewer denials

• Clearer documentation

• Stronger Medicare alignment

7. Differentiate Yourself From Competitors

Appendix S helps innovators articulate their unique contribution:

• Detection unique to your system?

• Quantifying clinically meaningful outputs?

• Generating independent conclusions?

Impact: Faster adoption and competitive advantage.

Case Examples: What Innovators Can Learn From Early Appendix S Precedents

I. Autonomous (92229 – Retinal Disease Detection)

• Independent diagnostic output

• Achieved Category I code

• Enables per-encounter payment

Lesson: Strong diagnostic evidence + autonomy = high reimbursement.

II. Augmentative (FFRCT – Coronary Physiologic Simulation)

• Meaningful quantification

• FDA labeling informed CPT descriptors

• Now reimbursed as standalone

Lesson: Quantitative outputs guiding care justify standalone codes.

III. Assistive (0764T, 0765T – ECG Risk-Based Assessment)

• Detect correlated signals

• Not diagnostic

• Category III tracking codes

Lesson: Assistive classification prevents misaligned coding.

How to Begin Applying Appendix S in Your Own Development Process

1. Categorize your AI product (assistive/augmentative/autonomous).

2. Map clinical evidence needs to the taxonomy.

3. Ensure FDA submissions use Appendix S terminology.

4. Define your correct reimbursement pathway early.

5. Engage payers using taxonomy-aligned explanations.

6. Build commercial models around machine “work.”

Appendix S Is a Competitive Advantage for AI Innovators

CPT Appendix S is more than a taxonomy—it is a strategic roadmap for AI/ML innovators navigating coding, valuation, and payer adoption. By defining how software contributes to medical services, Appendix S helps innovators:

• shape FDA labeling,

• design appropriate evidence,

• build stronger CPT applications,

• communicate clearly with payers,

• differentiate from competitors, and

• achieve faster, more reliable commercial success.

Companies integrating Appendix S early will gain a measurable advantage in bringing AI-enabled medical technologies to market—and ensuring they are reimbursed in ways that reflect their true clinical value.