August 6, 2019

CMS Releases 2020 Hospital OPPS and ASC Payment System Proposed Rule

Holland & Knight Alert
Miranda A. Franco


  • The Centers for Medicare & Medicaid Services (CMS) has published the Calendar Year (CY) 2020 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule.
  • Among notable changes, CMS proposes to continue payment reductions to hospitals purchasing 340B drugs, builds on price transparency guidance by including payer-specific negotiated rates and continues the last phase of site-neutral payment reductions for hospital outpatient clinic visits provided at off-campus, provider-based departments.
  • Comments on the proposed rules are due by Sept. 27, 2019. The Final Rule will likely be released in early November, and new payment provisions will go into effect on Jan. 1, 2020.

The Centers for Medicare & Medicaid Services (CMS) on July 29, 2019, published the Calendar Year (CY) 2020 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule.

Among notable changes, CMS proposes to continue payment reductions to hospitals purchasing 340B drugs, builds on price transparency guidance by including payer-specific negotiated rates and continues the last phase of site-neutral payment reductions for hospital outpatient clinic visits provided at off-campus, provider-based departments.

To learn more about the OPPS and ASC proposals, review the following resources:

Comments on the proposed rules are due by Sept. 27, 2019. The Final Rule will likely be released in early November, and new payment provisions will go into effect on Jan. 1, 2020.

Below is a summary of the highlights of the Proposed Rule:

Proposed HOPD Payment Updates

CMS proposes a 2.7 percent increase in the OPPS conversion factor (CF). The increase is based on the proposed hospital inpatient market basket increase of 3.2 percent for inpatient services reimbursed under the Inpatient Prospective Payment System (IPPS), minus the proposed multifactor productivity (MFP) adjustment of 0.5 percent. CMS anticipates the CY 2020 CF update, along with changes in enrollment, utilization and case mix, will result in total payments of approximately $79 billion to HOPD providers, an increase of approximately $6 billion from CY 2019 payment estimates. Hospital outpatient departments (HOPDs) failing to meet quality-reporting requirements will continue to receive a 2.0 percent reduction in payments for OPPS services.

Rural Adjustment

CMS proposes to continue the 7.1 percent adjustment for OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). The proposed adjustment would apply to all services paid under OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, items paid at charges reduced to costs and devices paid under the pass-through payment policy.

Proposed ASC Payment Updates

CMS proposes to update ASC rates by 2.7 percent and states that the update will encourage site neutrality between hospitals and ASCs as well as encourage the movement of services from hospital to lower-cost ASC settings. As finalized in the CY 2019 OPPS/ASC final rule, CMS will continue to use the hospital market basket update for ASC payment rates for CY 2020 to 2023.

Proposed Payment Adjustment for Certain Cancer Hospitals

CMS proposes to continue to provide additional payments to cancer hospitals so that the cancer hospital's payment-to cost ratio (PCR) after the additional payments is equal to the weighted average PCR for the other OPPS hospitals using the most recently submitted or settled cost report data.

Beginning CY 2018, Section 16002(b) of the 21st Century Cures Act requires the weighted average PCR be reduced by 1.0 percentage point.

A proposed target of 0.89 would be used to determine the CY 2020 cancer hospital payment adjustment to be paid at cost report settlement. The proposed payment adjustment would be the additional payments needed to result in PCR equal to 0.89 for each cancer hospital.

PHP Rate Setting

CMS proposes to update Medicare payment rates for the Partial Hospitalization Program (PHP) services furnished in HOPDs and Community Mental Health Centers (CMHCs). The PHPs are structured intensive outpatient programs consisting of a group of mental health services paid on a per diem basis under the OPPS, based on PHP per diem costs.

Update to PHP Per Diem Rates

CMS proposes to maintain the unified rate structure established in CY 2017, with a single PHP Ambulatory Payment Classification (APC) for each provider type for days with three or more services per day. CMS proposed to use the CMHC and hospital-based PHP (HB PHP) geometric mean per diem costs, consistent with existing policy, but with a cost floor equal to the CY 2019 final geometric mean per diem costs.

Increasing Price Transparency of Hospital Standard Charges

CMS is proposing to implement the Executive Order on Improving Price and Quality Transparency and further implement Section 2718(e) of the Public Health Service Act requiring that U.S. hospitals annually make public a list of standard charges for items and services, via:

  • defining "hospital," "standard charges," and "items and services"
  • requirements for making public a machine-readable file online that includes all standard charges for all hospital items and services
  • requirements for making public payer-specific negotiated charges for a limited set of 'shoppable' services that are displayed and packaged in a consumer-friendly manner, and
  • monitoring for hospital noncompliance and actions to address hospital noncompliance (including issuing a warning notice, requesting a corrective action plan and imposing civil monetary penalties), and a process for hospitals to appeal these penalties

Definition of Hospital Items and Services: "Hospital" is "an institution in any State in which State or applicable local law provides for the licensing of hospitals and which is licensed as a hospital pursuant to such law, or is approved by the agency of such State or locality responsible for licensing hospitals as meeting the standards established for such licensing" and includes:

  • District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa and the Northern Mariana Islands
  • Medicare and non-Medicare enrolled institutions

Charges to Publish: "Make public both gross charges and payer-specific negotiated charges for all items and services online in a machine-readable format.

Publish Limited Set of "Shoppable Services": CMS is proposing to require hospitals make public standard charge data (i.e., payer-specific negotiated charges) for at least 300 shoppable services (including 70 CMS-selected shoppable services and 230 hospital-selected shoppable services) in a form and manner that is more consumer-friendly. A "shoppable service" is a service that can be scheduled by a healthcare consumer in advance. Shoppable services are typically those that are routinely provided in non-urgent situations that do not require immediate action or attention to the patient, thus allowing patients to price shop and schedule a service at a time that is convenient for them.

The list of shoppable services may be found in Table 37 on page 627 of the rule. CMS is seeking comment on the 70 CMS-selected shoppable services they identify in Table 37. CMS is particularly interested in feedback on whether other services should be included because they are more common, more shoppable or both. CMS is also interested in feedback on whether it should require more or less than a total of 300 shoppable services. Specifically, it seeks comment from hospitals and consumers on whether a list of 100 shoppable services (or less) is a reasonable starting point.

Additional requirements include the following.

  1. Ancillary Items and Services: Include charges for services that the hospital customarily provides in conjunction with the primary service that is identified by a common billing code (e.g., Current Procedural Terminology (CPT)/ Healthcare Common Procedure Coding System (HCPCS)/Diagnosis-Related Group (DRG). Ancillary items and services may include laboratory, radiology, drugs, delivery room (including maternity labor room), operating room (including post-anesthesia and postoperative recovery rooms), therapy services (physical, speech, occupational), hospital fees, room and board charges, and charges for employed professional services.
  2. Prominent Display: Make sure that the charge information is displayed prominently on a publicly available webpage, clearly identifies the hospital (or hospital location), is easily accessible and without barriers, and is searchable.
  3. Updates: Update the information at least annually.
  4. Other Shoppable Services: If a hospital does not provide one or more of the 70 CMS-selected shoppable services, the hospital must select additional shoppable services such that the total number of shoppable services is at least 300.

Monitoring and Enforcement: CMS would have the authority to monitor hospital compliance with Section 2718(e) of the Public Health Service Act by evaluating complaints made by individuals or entities to CMS, reviewing individuals' or entities' analysis of noncompliance, and auditing hospitals' websites.

Should CMS conclude a hospital is noncompliant with one or more of the requirements to make public standard charges, CMS may assess a monetary penalty after providing a warning notice to the hospital, or after requesting a corrective action plan from the hospital if its noncompliance constitutes a material violation of one or more requirements.

  • If the hospital fails to respond to CMS' request to submit a corrective action plan or comply with the requirements of a corrective action plan, CMS may impose a civil monetary penalty on the hospital, of not more than $300 per day, and publicize these penalties on a CMS website.
  • CMS is proposing to establish an appeals process for hospitals to request a hearing before an Administrative Law Judge (ALJ) of the civil monetary penalty. Under this process, the CMS Administrator, at his or her discretion, may review in whole or in part the ALJ's decision.

Payment for 340B Drugs and Biologics

CMS is proposing to continue to pay ASP-22.5 percent for 340B-acquired drugs, including when furnished in nonexcepted off-campus PBDs paid under the PFS. In the proposed rule, CMS acknowledged the ongoing litigation relating to the lower payment amount, including a district court ruling that the agency exceeded statutory authority in adjusting the payment rate for 340B drugs. As such, CMS is asking for public comment on:

  1. the appropriate OPPS payment rate for 340B-acquired drugs
  2. whether a rate of ASP+3 percent could be an appropriate payment amount for these drugs, both for CY 2020 and for purposes of determining the remedy for CYs 2018 and 2019
  3. an appropriate remedy in litigation involving the OPPS payment policy for 340B-acquired drugs, which would inform future rulemaking in the event of an adverse decision on appeal in that litigation

On the pending litigation, if CMS loses its appeal of the hospital lawsuit, the agency said it would likely propose the specific remedy for 2018 and 2019 and, potentially, 2020 through the 2021 OPPS rulemaking process. Stakeholder comments to the above would inform those proposals.

Site Neutral Payments for Hospital Clinic Visits

As finalized in CY2019 OPPS/ASC final rule, CMS will complete implementation of the two-year phase-in of applying the Medicare Physician Fee Schedule (MPFS) rate for the clinic visit service (G0463 – Hospital outpatient clinic visit for assessment and management of a patient) when provided at an off-campus PBD and reimbursed under OPPS. This clinic visit is the most common service billed under OPPS and typically occurs in the physician office. CMS instituted the proposal based on its authority to restrict unnecessary increases in the volume of covered services. CMS projects that the proposal will save the Medicare program $810 million and lower the average beneficiary copayments from $23 to $9 in 2020.

Proposed Prior Authorization for Certain HOPD Services

CMS proposes to require prior authorization for the following five services to ensure they are billed only when medically necessary: 1) blepharoplasty, 2) botulinum toxin injections, 3) panniculectomy, 4) rhinoplasty and 5) vein ablation. CMS reviewed claims data and identified these services as demonstrating an unnecessary increase in volume.

Wage Index Policy

CMS will continue its policy of using the wage index policies and adjustments proposed in the Inpatient Prospective Payment System (IPPS) for non-IPPS facilities paid under the OPPS. For the FY 2020 IPPS wage index, CMS proposed to increase the wage index for certain low-wage hospitals at the expense of payments made to hospitals with the highest wage index. Under this policy, the hospitals in the bottom 25th percentile of wage index would be increased by 50 percent of the difference between current policy and the wage index for the 25th percentile for all hospitals. Hospitals with a wage index in the 75th percentile or higher would see their wage index decreased. However, CMS proposed a 5 percent cap on the reduction of any hospital's wage index in a given year. The proposed payment changes will be phased in over four years if finalized. CMS also proposed to change the rural floor calculation by removing reclassification of hospitals as "rural" (vs. "urban") in the FY 2020 IPPS proposed rule.

Changes to the Inpatient-Only List

CMS is proposing to remove Total Hip Arthroplasty from the Inpatient-Only (IPO) list, making it eligible to be paid by Medicare in both the hospital inpatient and outpatient setting. Additionally, CMS is proposing to establish a one-year exemption from medical review activities for procedures removed from the IPO list beginning in CY 2020 and subsequent years.

Specifically, CMS is proposing that Beneficiary Family Centered Care-Quality Improvement Organization (BFCC-QIO) reviews of short-stay inpatient claims for procedures that have been removed from the IPO list within the first year will not be counted against a provider in the context of the two-midnight rule.

BFCC-QIOs will have the opportunity to review such claims to provide education to providers and practitioners regarding compliance with the two-midnight rule. Furthermore, these procedures would also not be eligible for referral to the Recovery Audit Contractor (RAC) for one year after their removal from the IPO list.

CMS states that a one-year postponement on QIO referral to RACs and RAC "patient status" review for procedures performed in the inpatient setting is an adequate amount of time to allow providers to gain experience with application of the two-midnight rule to these procedures, and the documentation necessary for Part A payment for those patients for which the admitting physician determines that the procedures should be furnished in an inpatient setting. Furthermore, this one-year moratorium would allow providers time to update their billing systems and gain experience concerning newly removed procedures eligible to be paid under either IPPS or OPPS, while avoiding the potential adverse site of service determinations.

Hospital Outpatient Quality Reporting Programs

For the CY 2020 Hospital Outpatient Quality Reporting (OQR) Program, CMS proposes to remove one web-based measure for the CY 2022 program year and requests comments on adding to the Hospital OQR program four patient safety measures existing in the ASC Quality Reporting. For the ASC Quality Reporting (ASCQR) Program, CMS proposes to adopt one claims-based measure and requests comments on potential submission methods for certain patient safety measures in future rulemaking.

Comprehensive Ambulatory Payment Classifications (APCs)

CMS proposes to create two new comprehensive APCs (C-APCs): C-APC 5182 (Level 2 Vascular Procedures) and C-APC 5461 (Level 1 Neurostimulator and Related Procedures). If the proposal is finalized, the total number of C-APCs will rise to 67.

Revision to the Organ Procurement Organization Conditions for Certification

CMS is proposing a revised definition of "expected donation rate" to align with the Scientific Registry of Transplant Recipients (SRTR) definition for one of the three outcome measures that Organ Procurement Organizations (OPOs) are required to meet. Further, CMS is proposing to reduce the period for this outcome measure for the 2022 recertification cycle from 24 months to 12 (from Jan. 1, 2020, through Dec. 31, 2020).

Potential Changes to the Organ Procurement Organization and Transplant Center Regulations: Request for Information (RFI)

CMS is considering a comprehensive proposal that would update the OPO Conditions for Coverage (CfCs) and potentially update the transplant center Conditions of Participation (CoPs). CMS is soliciting public comments regarding what revisions may be appropriate for the current OPO CfCs and the current transplant center CoPs. Also, CMS is seeking public comments on two potential outcome measures for OPOs. CMS is especially interested in public comments about the validity and reliability of these measures.

Laboratory Date of Service

CMS seeks public comment on three options for potential changes to the Laboratory Date of Service exception:

  • Changing the Test Results Requirement at 42 CFR 414.510(b)(5)(iv): This change would specify that the ordering physician would determine whether the results of the ADLT or molecular pathology test are intended to guide treatment provided during a hospital outpatient encounter, if the other four requirements under § 414.510(b)(5) are met. Under this approach, the test would be considered a hospital service unless the ordering physician determines that the test does not guide treatment during a hospital outpatient encounter
  • Limiting the Laboratory DOS Exception at 42 CFR 414.510(b)(5) to ADLT: This would limit the laboratory DOS provisions of § 414.510(b)(5) to tests designated by CMS as an ADLT under paragraph (1) of the definition of an ADLT in § 414.502.
  • Excluding Blood Banks and Blood Centers from the Laboratory DOS Exception at 42 CFR 414.510(b)(5): This would exclude blood banks and centers from the laboratory DOS exception at § 414.510(b)(5), resulting in the date of service for those tests to be the date that the specimen was collected. The option is considered because blood banks and centers perform molecular pathology test for a different clinical purpose (to identify the most compatible blood product for a patient, whereas other laboratories typically provide molecular pathology testing for diagnostic purposes), which "is inherently tied to a hospital service because hospitals receive payment for and/or use the blood and/or blood products provided by blood banks and blood centers to treat patients in the hospital setting."

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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