hospital patient


Final Hospital Outpatient Prospective Payment System

Moves forward with Site Neutral Payments, other changes

The final rule phases in payment changes to newer off-campus Provider-Based Departments (PBDs) over two years, makes minor revisions to quality reporting and provides incentives for non-opioid pain management.

November 2, 2018 | Health care

Hospital Outpatient Prospective Payment System proposed rule moves forward with Site Neutrality, other changes

On November 2, 2018, the Centers for Medicare and Medicaid Services (CMS) released the final rule for the 2019 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Payment System (ASC), implementing policies aimed at moving forward the Administration’s efforts on site-neutral payment policy as part of an effort to address health care spending growth.

In particular, the final rule includes changes to payments for off-campus Provider-Based Departments (PBDs), including a policy to reimburse clinic visits at non-excepted PBDs (i.e., those PBDs newly billing Medicare after November 1, 2015) using the Physician Fee Schedule (PFS)-equivalent payment rate rather than the inpatient payment rate. In addition, CMS will 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 changes as policies aimed at reducing incentives to provide care in more costly settings.

The final rule will be published in the federal register on November 21, 2018.

Highlights of key finalized policies are provided below.


2019 OPPS rates

CMS finalized an overall increase in OPPS rates for 2019 of 1.35 percent, up from 1.25 percent in the proposed rule. The overall rate increase factors in productivity adjustments and a 0.75 percent sequestration reduction under the Budget Control Act’s enforcement provisions.

Non-excepted off-campus 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 (PFS) 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 are not eligible for payments under OPPS effective January 1, 2017.

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

Clinic visits

To fully implement site-neutral payment requirements under the 2015 BBA, clinic visits to non-excepted off-campus PBDs (HCPCS code G0463) will be reimbursed at the PFS-equivalent rate.

In response to commenters expressing concern about an abrupt rate reduction, the final rule provides a two-year phase-in of the PFS-equivalent rates. In 2019, 50 percent of the payment reduction will be applied for applicable clinic visit services, amounting to roughly 70 percent of the OPPS rate. In 2020, the full reduction will occur, where clinic visits would be reimbursed at approximately 40 percent of the OPPS rate, as was initially proposed for 2019.

As finalized, Medicare payments for a clinic visit to off-campus PBDs will be reduced from approximately $116 to $81 in 2019, reducing Medicare outlays by $380 million in 2019.

The American Hospital Association and other affiliated organizations have indicated they intend to challenge the rate reductions in court, stating in a press release that the reductions are "based on unsupportable analyses and erroneous policy rationales. These ill-advised cuts will hit patients in rural and vulnerable communities especially hard."

New clinical services at excepted PBDs

Citing operational challenges, CMS declined to finalize a policy to limit the definition of "excepted items and services" eligible for reimbursement under the OPPS at excepted PBDs to the clinical families of services that were furnished at the facility during a baseline period of November 1, 2014, through November 1, 2015. CMS said it will continue to monitor this area.

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, which are reimbursed at the PFS-equivalent rate.

For 2019, CMS finalized a policy that will apply this 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 2 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 eight measures from OQR reporting requirements in 2019, one in 2020, and seven more in 2021.

CMS finalized a number of other changes to OQR performance periods and program specifications.

ASC Payment System

Updates to ASC Payment System rate

Under the final rule, ASC payment rates will increase by 2.1 percent for 2019, including all adjustments. The ASC increase is significantly greater than the 1.35 percent increase for OPPS rates. CMS states in the accompanying final rule fact sheet 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 finalized its proposal 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 will calculate the geometric mean, the median, and the arithmetic mean of market rates, to use the rulemaking process to determine the method that should be used to set payment for the new technology service for the upcoming year.

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

Non-opioid pain management

CMS finalized a policy to pay for certain non-opioid pain management drugs separately at ASP plus 6 percent in ambulatory surgery centers.

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.

ASC Quality Reporting (ASCQR) program

Similar to OPPS quality reporting, the ASCQR requires that ASCs meet reporting requirements or else receive a 2 percent reduction in payments. CMS also proposes to remove four measures from the ASCQR dataset on the basis of their either being topped out or creating undue burdens on providers.

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.

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