CMS to Boost Outpatient Reimbursement, Remove Inpatient Only List

August 05, 2020 - Medicare outpatient payments are slated to increase by 2.6 percent next year, a $7.5 billion boost compared to 2020, according the proposed 2021 Outpatient Prospective Payment System (OPPS) rule.

Released by CMS on Tuesday, the proposed rule estimated that total payments to providers would increase to nearly $84 billion in 2021. However, payments to hospitals acquiring outpatient drugs through the 340B Drug Pricing Program would be lower.

“We propose for CY 2021 and subsequent years to pay for drugs acquired under the 340B program at ASP minus 34.7 percent, plus an add-on of 6 percent of the product's ASP, for a net payment rate of ASP minus 28.7 percent based on the results of the Hospital Acquisition Cost Survey for 340B-Acquired Specified Covered Drugs,” CMS stated in the proposed rule.

The agency also proposed an alternative of continuing its policy of reimbursing hospitals 22.5 percent less than the average sales price for outpatient drugs acquired through the federal drug discount program.

Rural sole community hospitals, cancer hospitals exempt from the prospective payment system, and children’s hospitals would still be exempted from the 340B payment policy in 2021 and subsequent years.

READ MORE: Hospital, Outpatient Visits Fell Up to 60% During COVID-19 Crisis

An appeals court recently upheld the current OPPS policy after hospitals challenged the nearly 30 percent reduction in payments for 340B-acquired drugs in court.

340B Health, a trade group representing hospitals in the 340B Drug Pricing Program, said the new proposal to slash hospital outpatient payments for 340B-acquired drugs is disappointing, but not surprising.

“It should go without saying that during a global pandemic, it is foolhardy for the administration to stubbornly push and worsen a Medicare payment policy that hurts safety-net hospitals and their patients,” Maureen Testoni, president and CEO of 340B Health said in a statement.

CMS estimated that OPPS payments for 340B drugs would decrease by approximately $427 million in 2021 under the proposed rule. Medicare beneficiaries would also save an additional $85 million in out-of-pocket costs, the agency reported.

CMS also proposed in the 2021 OPPS rule to eliminate the inpatient only (IPO) list.

READ MORE: Inpatient No Longer King as Hospital Outpatient Revenue Grows

In light of significant advancements in medicine since the start of the IPO list in 2000, the agency proposed to let physicians should use their own clinical knowledge and judgment, in conjunction with consideration of the patient’s specific needs, to determine if a procedure can be safely performed in the hospital outpatient setting.

“We believe that this change will ensure maximum availability of services to beneficiaries in the outpatient setting,” CMS stated in the proposed rule.

The agency would start next year by removing approximately 300 musculoskeletal-related services and solicit comments from stakeholders on how the other services can be removed from the list over the next three calendar years.

Medicare does not pay providers under the OPPS for services on the IPO list. According to the federal healthcare program, these services must be performed in the inpatient setting because of the invasive nature of the procedure, the need for at least 24 hours of postoperative recovery time, or the underlying physical condition of the patient who would require the surgery.

Currently, there are approximately 1,740 services on the IPO list.

READ MORE: AHA, AAMC Want Rehearing for Hospital Site-Neutral Payment Case

Most recently, CMS removed total knee arthroplasty from the IPO list in the 2018 OPPS final rule and discussed the removal of total hip arthroplasty from the IPO list in the 2020 OPPS final rule.

Elimination of the IPO list would help to shift services out of the hospital and to alternative care settings, like ambulatory surgical centers (ASCs).

According to the proposed rule, CMS would increase Medicare payments by 2.6 percent for ASCs that meet quality reporting requirements. Based on the proposed update, CMS estimated that total payments to ASCs would increase by approximately $106 million to a total to $5.45 billion next year.

The agency also proposed to add 11 procedures to the covered procedures list for ASCs. The services would include total hip arthroplasty (CPT 27130).

“The COVID-19 pandemic has highlighted the need for more healthcare access points throughout the country,” CMS wrote in the proposed rule. “Because the pandemic has forced many ASCs to close, thereby decreasing Medicare beneficiary access to care in that setting, we believe allowing greater flexibility for physicians and patients to choose ASCs as the site of care, particularly during the pandemic, would help to alleviate both access to care concerns for elective procedures as well as access to emergency care concerns for hospital outpatient departments.”

The proposed 2021 OPPS rule would also, among other changes, loosen restrictions on physician-owned hospitals, simplify the methodology used to calculate Overall Hospital Quality Star Ratings, and impose prior authorization requirements on cervical fusion with disc removals and implanted spinal neurostimulators.

“President Trump’s mandate is to put patients and doctors back in charge of healthcare,” CMS Administrator Seema Verma said in an announcement. “Following through on that mandate entails loosening the stranglehold of government control that has accumulated over decades. Surgeries can be expensive. Patients should have as many options as possible for lowering their costs while getting quality care. These proposed changes, if finalized, would do exactly that, help put patients and doctors back in the driver’s seat and in a position to make decisions about their own care."

But the American Hospital Association (AHA) strongly opposed payment cuts for 340B drugs and attempts to loosen restrictions on physician-owned hospitals.

“The Congressional Budget Office, Medicare Payment Advisory Commission and independent researchers have concluded that physician self-referral to facilities in which they have an ownership stake leads to greater per capita utilization of services and higher costs for the Medicare program,” Tom Nickels, AHA’s executive vice president, said in a statement.

“Further, physician-owned hospitals tend to cherry-pick the most profitable patients, jeopardizing communities’ access to full-service care. This trend creates a destabilizing environment that leaves sicker and less-affluent patients to community hospitals, threatening the health care safety net.”

The AHA plans to further evaluate proposed hospital star rating changes.

Comments on the proposed rule are due by Oct. 5, 2020.

To view the complete proposed rule, click here.