Hospital nurse and patients


Hospital Outpatient Prospective Payment System proposed rule moves forward with site neutrality, other changes

On July 25, 2018, the Centers for Medicare and Medicaid Services (CMS) released the proposed rule for the 2019 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Payment System (ASC), laying out proposals aimed at moving forward the Administration’s efforts on site-neutral payment policy as part of an effort to address health care spending growth.

July 30, 2018 | Health care

In particular, the proposed rule includes proposed changes to payments for off-campus provider-based departments (PBDs), including a proposal that would reimburse clinic visits at non-excepted PBDs using the Physician Fee Schedule (PFS)-equivalent payment rate rather than the outpatient payment rate. In addition, CMS proposes to allow ASCs to provide a wider array of services, potentially creating a new incentive to deliver more care in non-hospital settings in certain circumstances.

CMS described the proposed changes as policies aimed at reducing incentives to provide care in more costly settings.

The proposed rule also includes requests for information on how to structure a Competitive Acquisition Program in an effort to control spending on prescription drugs reimbursed under Medicare Part B, price transparency and efforts to drive interoperability of electronic health information.

The proposed rule was published in the Federal Register on July 31, 2018. Comments are due to CMS by September 24, 2018, and a final rule is targeted for release in November 2018.

Highlights of key proposals are provided below.


2019 OPPS rates

CMS proposes an increase of 1.25 percent for OPPS payment rates for 2019 after factoring in productivity adjustments and a 0.75 percent sequestration reduction under the Budget Control Act’s enforcement provisions. CMS states that the increase is largely offset by the proposal to pay PBDs at the PFS-equivalent rate, which is projected to lower overall OPPS payments by 1.2 percent.

Non-excepted off-campus provider-based departments (PBDs)

The Bipartisan Budget Act (BBA) of 2015 included provisions aimed at eliminating the incentive for hospitals to acquire physician practices, convert the practices to PBDs, and receive higher Medicare payments.

Items and services furnished at off-campus PBDs are billed using Healthcare Common Procedure Coding System (HCPCS) codes and paid under OPPS. In addition, physician (professional component) services at off-campus PBDs are eligible for payment under the Medicare Physician Fee Schedule (MPFS) facility rate.

As a result of the provisions of the BBA of 2015, off-campus PBDs that were not billing Medicare for covered services furnished prior to November 2, 2015 (the date of enactment for the law) generally will not be eligible for payments under OPPS effective January 1, 2017.

The proposed rule would expand certain policies that CMS adopted for 2017 as the agency implemented the BBA’s site neutral payment provisions for the first time.

Clinic visits

The proposed rule would reduce payments for clinic visits to off-campus PBDs (HCPCS code G0463). Under the proposed payment structure, non-excepted PBDs would receive a PFS-equivalent rate for a clinic visit service when provided at an off-campus provider-based department that is paid under OPPS. This rate is generally calculated as 40 percent of the OPPS rate.

If the proposal is finalized, Medicare payments for a clinic visit to off-campus PBDs would be reduced from approximately $116 to $46, reducing Medicare outlays by $760 million in 2019.

New clinical services

In the proposed rule, CMS proposes limiting the definition of “excepted items and services” eligible for reimbursement under the OPPS at excepted PBDs as a result of ongoing concern at the agency about the expansion of services in excepted PBDs. Under the proposed rule, excepted items and services would be items or services furnished and billed by an excepted off-campus PBD only from the clinical families of services for which the excepted off-campus PBD furnished (and subsequently billed under the OPPS) for at least one item or service from November 1, 2014, through November 1, 2015. The proposed policy change would take effect January 1, 2019.

As a result of the proposed policy, excepted PBDs would be required to determine which of the 19 corresponding clinical families of services they furnished items or services in during the baseline period of November 1, 2014, through November 1, 2015.

340B Drug Discount Policy

In the 2018 OPPS final rule, payments for covered outpatient drugs under the 340B program were reduced from the standard rate of Average Sales Price (ASP) plus 6 percent to ASP minus 22.5 percent for most hospital-affiliated providers. For 2018, this change in payment policy did not apply to drugs purchased at non-excepted off-campus PBDs (i.e., those PBDs newly billing Medicare after November 1, 2015), which are reimbursed at the PFS-equivalent rate.

For 2019, CMS proposes to apply the change in payment policy to drugs purchased at non-excepted off-campus PBDs.

Hospital Outpatient Quality Reporting (OQR) program

Under OQR, hospitals are required to report on quality measures for services rendered in an outpatient hospital setting to avoid a two percent decrease in OPPS rates.

As part of a larger effort to reduce administrative burden and focus on more meaningful quality measures, CMS proposes to remove 11 measures from OQR reporting requirements in 2019, one in 2020, and nine more in 2021. CMS proposes other changes to OQR performance periods and program specifications.

ASC Payment System

Updates to ASC Payment System rates

Under the proposed rule, ASC payment rates would increase by two percent for 2019, including all adjustments. The proposed ASC increase is significantly greater than the 1.25 percent increase for OPPS rates. CMS states that this difference in rate increases is intended to encourage site neutrality between hospitals and lower-cost ambulatory surgical settings.

ASC Covered Procedure List (CPL)

In general, surgical procedures that are covered under the ASC payment system are limited to procedures not expected to present a significant safety risk or require active monitoring and care by the midnight following the procedure. Given reported clinical experience, CMS has proposed to allow a new set of cardiovascular codes to the CPL.

New Technology Payment Policy for Low-Volume Services

Services designated as New Technology Ambulatory Payment Classifications that have fewer than 100 annual claims would be paid under one of several alternative payment methodologies. Based on up to four years of data, CMS is proposing to calculate the geometric mean, the median, or the arithmetic mean of market rates, and solicits comment on which method to use to establish payment rates for the services.

The proposed change is intended to provide greater transparency and predictability for the payment of such services from year to year.

Non-opioid pain management

CMS proposes to pay for certain non-opioid pain management drugs separately at ASP plus six percent.

Under current regulation, such drugs are considered supplies when used in relation to a surgical procedure, and are therefore factored into that procedure’s rate, and ineligible for reimbursement on a standalone basis. These medications include certain classes of local anesthetics that CMS found to have a lower usage rate in ambulatory surgical centers, when compared to a hospital-based outpatient setting.

The purpose of this change is to introduce an incentive to reduce the use of opioid medications as part of ASC surgical procedures. CMS seeks further input on whether other drugs can be paid under a similar policy, whether in an ASC and an OPPS setting.

ASC Quality Reporting (ASCQR) program

Similar to OPPS quality reporting, the ASCQR requires that ASCs meet reporting requirements or else receive a two percent reduction in payments. CMS also proposes to remove eight measures from the ASCQR dataset on the basis of their either being topped out or creating undue burdens on providers. CMS proposes to remove one additional measure in 2020, followed by seven more in 2021, as well as changes to performance periods and other aspects of the reporting process.

Additional requests for information

The Competitive Acquisition Program (CAP) for Part B drugs

President Trump’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs requested further public input on whether private market strategies could be used to lower the price of Part B drugs that are usually paid at ASP plus six percent.

In the proposed rule, CMS seeks feedback on whether a model based on currently unimplemented statutory provisions for a private sector vendor-administered Competitive Acquisition Program could be used to reduce Part B drug costs. CMS is specifically interested in whether any particular provider group or drug class should be exempted from a future CAP-based payment model.

Price transparency

Citing ongoing concerns about a lack of clarity for consumers in regard to the prices for medical services, CMS continues to seek input on several issues related to price transparency. Questions posed in the request include:

  • How to define a “standard charge,” i.e., whether this would relate to a chargemaster rate, the average or median rates that a provider bills for a given service, or another factor.
  • What information would be most beneficial to patients, and how can providers and suppliers help patients use charge or cost information to support their care decisions.
  • Whether providers and suppliers should be required to give patients an estimate of their out of pocket costs, and whether providers should be required to tell patients what Medicare pays for a given service.
  • What impact Medigap plans have on patient understanding of their out-of-pocket costs, including who is in the best position to give patients this information.
Interoperability and MyHealthEData

CMS solicits feedback on several aspects of interoperability and electronic exchange of health records, including whether there should be corresponding new or different conditions of participation for Medicare providers, or coverage of Medicare services. Those include:

  • Whether a new condition of participation to require electronic exchange of medically necessary information would help to reduce information blocking as defined in the 21st Century Cures Act
  • If CMS should propose new conditions to ensure a patient’s right to electronically access health information without undue burden
  • Suggestions for a reasonable compliance timeframe for such conditions
  • Whether a condition of participation can help improve the overall state of electronic health information exchange in relation to care quality and patient safety
  • If non-electronic medical information sharing should be permitted to continue
  • Possible exemptions, as well as operational and legal considerations

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

Contact us

Anne Phelps
Deloitte Risk and Financial Advisory

US Health Care Regulatory Leader
Deloitte & Touche LLP


Daniel Esquibel
Senior manager
Deloitte Risk and Financial Advisory
Deloitte & Touche LLP


Ethan Joselow
Deloitte Risk and Financial Advisory

Deloitte & Touche LLP


Fullwidth SCC. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.

Site-within-site Navigation. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.

Did you find this useful?