On November 2, 2018, CMS issued the 2018 Hospital Outpatient Prospective Payment System (“OPPS”) Final Rule (“Final Rule”) in which it finalized its proposal to pay the lower Physician Fee Schedule (“PFS”) rate rather than the current OPPS rate for evaluation and management services performed at excepted off-campus provider-based departments (“PBDs”).  CMS did not move forward with its proposal to limit excepted off-campus PBDs to previously provided clinical families of services.  Finally, CMS finalized its proposal to dramatically cut payments rates for 340B drugs furnished at nonexcepted off-campus PBDs.   

Off-Campus Provider-Based Departments and Site Neutral Payments

Under Section 603 of the Bipartisan Budget Act of 2015 (“BBA”), CMS reimburses hospitals for outpatient services provided at certain off-campus PBDs under the PFS, commonly referred to as a “site neutral” payment policy. However, certain off-campus PBDs furnishing services to Medicare beneficiaries prior to November 2, 2015, and freestanding emergency departments were excepted from the payment reductions and continued to be paid the applicable (and higher) OPPS rate.  In the proposed rule, CMS expressed concern that the above policy has incentivized a shift of services to excepted off-campus PBDs in a way that was both clinically unnecessary and more costly.  In the Final Rule, citing authority under Social Security Act § 1833(t)(2)(F), CMS finalized a policy to pay the lower site-neutral PFS payment rate for clinic visit services (HCPCS code G0463) billed with the “PO” claims modifier (now required for all off-campus PBDs of a hospital furnishing outpatient hospitals items and services).  In other words, evaluation and management visits, even when provided in an excepted off-campus PBD, will be paid the lower PFS rate.  This will reduce payments by $70 per visit, and CMS will implement this change without consideration of budget-neutrality (i.e., savings will not be redistributed across Medicare Part B).  CMS will phase in the reduction over a two year period; in 2019, it will only apply 50 percent of the total reduction in payment.  CMS expects this to save $380 million in 2019.  Commenters objected that such moves exceed CMS’s statutory authority; CMS responded that § 1833(t)(2)(F) gives it “broad authority to develop a method for controlling unnecessary increases in the volume of covered outpatient department” services.

CMS also previously expressed concern about the ability of excepted off-campus PBDs to expand the number and types of services furnished (and thus paid under the OPPS), which would purportedly incentivize hospitals to purchase additional physician practices and expand services furnished by their existing excepted off-campus PBDs.  CMS had proposed a policy by which excepted services were limited to the “clinical families of services” for which the off-campus PBD billed and was paid for at least one item/service from November 1, 2014, through November 1, 2015.  If furnishing a service in a “new” clinical family of service, excepted off-campus PBDs would be paid the PFS rather than OPPS rate under the proposal.  In other words, excepted off-campus PBDs could not expand their services and expect to be paid the higher OPPS rate.  Ultimately, however, CMS declined to adopt this policy in the Final Rule, as it might “pose operational challenges and administrative burden for both CMS and hospitals.”  Therefore, “an excepted off-campus PBD will continue to receive payments under the OPPS in Calendar Year (“CY”) 2019 for all billed items and services that are paid under the OPPS,” regardless of whether it furnished the services/items prior to enactment of BBA § 603.  Nonetheless, CMS will continue to “monitor the expansion of services in excepted off-campus PBDs” and “may propose to adopt a limitation on the expansion of services” in the future.

Application of the 340B Drug Payment Policy to Nonexcepted Off-Campus Provider-Based Departments of a Hospital

Section 340B of the Public Health Service Act allows participating hospitals and other providers to purchase certain covered outpatient drugs (“340B drugs”) at discounted prices from manufacturers.  Generally, covered outpatient drugs are reimbursed at average sales price (“ASP”) plus 6 percent in accordance with sections 1847A and 1842(o)(1)(C) of the Act.  In the CY 2018 OPPS/ASC Final Rule (discussed here), CMS dramatically cut reimbursement for 340B drugs by paying for 340B drugs under the OPPS system at ASP minus 22.5 percent, rather than ASP plus 6 percent.  However, that payment cut applied only to excepted off-campus PBDs.  Sections 1833(t)(1)(B)(v) and (t)(21) of the Act, as amended by BBA § 603, excluded nonexcepted off-campus PBDs from the OPPS and instead made payment “under the applicable payment system” under Medicare Part B.  In other words, because nonexcepted off-campus outpatient PBDs were no longer payable under the OPPS, they were outside the scope of the OPPS payment cuts and could continue to be paid at ASP plus 6 percent.

In this Final Rule, however, CMS finalized its proposal to apply the ASP minus 22.5 percent payment formula to nonexcepted off-campus PBDs.   CMS’s rationale is that the difference in the payment amounts for 340B drugs for excepted off-campus PBDs versus nonexcepted off-campus PBDs purportedly creates a “perverse incentive” for hospitals to move drug administration services for 340B drugs to nonexcepted off-campus PBDs to receive a higher payment amount for these drugs.  Many commenters contended that extending the ASP minus 22.5 percent payment policy to nonexcepted off-campus PBDs would “effectively eviscerate” the 340B program.  CMS disagreed with these comments.

Many commenters also challenged CMS’s legal authority to cut 340B drug payments to nonexcepted off-campus PBDs.  Commenters indicated that Congress, in BBA § 603, did not give CMS the authority to deviate from the default payment rules for 340B drugs under 1847A and 1842(o)(1)(C) of the Act.  CMS responded that it believes the agency has the flexibility to pay for 340B drugs for nonexcepted off-campus PBDs at an amount other than the amount dictated by sections 1842(o)(1)(C) and 1847A of the Act (i.e. ASP plus 6 percent).  CMS cited Section 1833(t)(21)(C) of the Act as its authority to identify the PFS as the “applicable payment system” for 340B drugs instead of under Sections 1847A and 1842(o).

Removal of Quality Measures under Quality Reporting Programs

The Quality Reporting Program is a pay-for-reporting quality program that requires providers to meet certain quality reporting measures.  Failure to meet these measures results in payment reductions e.g., a 2.0 percentage point to the fee schedule increase factor.   The quality measures affected by the Final Rule are highlighted, in part, below.

Hospital Outpatient Quality Reporting (“OQR”) Program

For the CY 2020 payment determination and subsequent years, CMS finalized its proposal to remove the OP-27: Influenza Vaccination Coverage Among Healthcare Personnel measure.  For the other nine measures proposed for removal, beginning with the CY 2021 payment determination and subsequent years, CMS has removed seven measures:

• OP-5: Median Time to ECG;
• OP-9: Mammography Follow-up Rates;
• OP-11: Thorax CT Use of Contrast Material;
• OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into Their Qualified/Certified EHR System as Discrete Searchable Data;
• OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus CT;
• OP-17: Tracking Clinical Results between Visits; and
• OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps - Avoidance of Inappropriate Use.

CMS did not remove OP-29, Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients or OP-31: Cataracts—Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery.

Ambulatory Surgical Center Quality Reporting (“ASCQR”) Program

CMS removed the ASC-8: Influenza Vaccination Coverage Among Healthcare Personnel measure.  Beginning with the CY 2021 payment determination and subsequent years, CMS removed the ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps - Avoidance of Inappropriate Use measure.

CMS did not finalize the removal the following ASCQR measures:

• ASC-9: Endoscopy/Polyp Surveillance Follow-up Interval for Normal Colonoscopy in Average Risk Patients; and
• ASC-11: Cataracts - Improvement in Patient's Visual Function within 90 Days Following Cataract Surgery.

CMS did not finalize the removal the following ASCQR measures, but is suspending data collection for them until further notice:

• ASC-1: Patient Burn;
• ASC-2: Patient Fall;
• ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant; and
• ASC-4: All-Cause Hospital Transfer/Admission.

PPS-Exempt Cancer Hospital Quality Reporting (“PCHQR”) Program

CMS announced that it would defer a final decision on its proposed removal of two measures in order to conduct additional data analyses to assess measure performance based on new information provided by the Centers for Disease Control and Prevention.  Therefore, CMS is not removing Catheter-Associated Urinary Tract Infection Outcome Measure (CAUTI) (NQF #0138) and Central Line-Associated Bloodstream Infection Outcome Measure (CLABSI) (NQF #0139).

Additional Key Takeaways

Other key takeaways from the Final Rule include:

• 2019 Rates:  CMS will increase OPPS rates by 1.35 percent for CY 2019.  This includes a market basket increase of 2.9 percent, a negative 0.8 percent adjustment for multi-factor productivity, and a 0.75 percent point adjustment as required by the Affordable Care Act.  Altogether, CMS anticipates increasing OPPS payment by approximately $5.8 billion over what it paid in CY 2018.  ASC payment rates will increase by 2.1 percent, which also includes a market basket increase of 2.9 percent and a negative multi-factor productivity adjustment as required by the Affordable Care Act of 0.8 percent.  Altogether, ASC payments will increase by approximately $200 million over last year.

• C-APCs:  CMS is adding three new comprehensive APCs, which packaged payment for “adjunctive and secondary items, services, and procedures into the most costly primary procedure under the OPPS” starting in 2015.  The new C-APCs effective CY 2019 are C-APC 5163 (Level 3 ENT Procedures; ENTXX clinical family), C-APC 5183 (Level 3 Vascular Procedures; VASCX clinical family), and C-APC 5184 (Level 4 Vascular Procedures; VASCX clinical family), bringing the total C-APCs to 65.

• New Technology APC:  CMS is finalizing a “smoothing methodology” policy for New Technology Ambulatory Payment Classifications (“APCs”) with fewer than 100 OPPS claims, allowing the agency to use up to 4 years of claims data (instead of only two) to establish the payment rate.  These APCs are typically new procedures lacking sufficient claims history to establish accurate payment and assignment to a clinical APC.  New Technology APCs are also excluded from bundling under the C-APC procedures.

• Inpatient Only:  CMS is removing four procedures from the inpatient-only list (Current Procedural Terminology (“CPT”) Code 31241, nasal/sinus endoscopy, surgical, with ligation of sphenopalatine artery; CPT Code 01402, anesthesia procedure on the knee and popliteal area; CPT 0266T, implantation or replacement of carotid sinus baroreflect activation device; and CPT 00670, anesthesia for extensive spine and spinal cord procedures).  CMS is also adding one inpatient-only procedure:  CPT C9606, percutaneous transluminal revascularization of acute total/subtotal occlusion during acute myocardial infarction, coronary artery or coronary artery bypass graft.

• ASC Covered Surgical Procedures:  CMS is revising the definition of “surgery” in the ASC payment system to allow certain “surgery-like” procedures.  Specifically, CMS will include any procedure described with the Category 1 CPT codes that the AMA defines as surgery (CPT codes 10000 through 69999), as well as procedures described by Level II HCPSC codes or Category I/Category III CPT codes “that directly crosswalk or are clinically similar to procedures in the CPT surgical range” that do not pose significant risk when performed in the ASC, do not typically require an overnight stay, and are separately paid under the OPPS.  This new policy results in CMS adding 17 new cardiovascular codes to the ASC Covered Procedure List (CPT codes 93451, 93452, 93453, 93454, 93455, 93456, 93457, 93458, 93459, 93460, 93461, 93462, 93566, 93567, 93568, 93571, and 93572).

• Non-Opioid Pain Management:  In part a response to the President’s Commission on Combating Drug Addiction and the Opioid Crisis, CMS is changing the packaging policy for non-opioid pain management drugs when functioning in as a supply in a surgical procedure, administered in the ASC setting.  Under the Final Rule, CMS will unpackage the ASC payment for such drugs and pay separately as ASP plus 6 percent to encourage their use over prescription opioids.  No such changes were made in the hospital setting for payments under the OPPS, though CMS will continue to consider whether unpackaging is appropriate in future rulemaking.

• Pain Communication Survey Questions:  CMS will remove the Communication About Pain questions from the Hospital Consumer Assessment of Healthcare Providers and Systems, a patient satisfaction survey required to be given to inpatients that feeds into the Hospital inpatient quality reporting (“IQR”) program.  The questions asked whether patients were in pain, how often hospital staff discussed their pain with them, and how often staff discussed pain treatment, and commenters expressed concern that such questions (though revised in prior years) placed pressure of staff to prescribe more opioids to achieve higher scores.  The removal will be effective with October 2019 discharges for FY 2021 payment determinations onward.

• Partial Hospitalization Program (“PHP”):  After applying certain trims, exclusions, and adjustments, CMS finalized a PHP APC geometric meant per diem cost at $121.62 for all Community Mental Health Centers providing more than three services per day.  This is a fifteen percent decrease from 2018.  Hospital-based PHPs are paid at $222.76 per day, an increase over 2018.

The agency’s press release is available here; the fact sheet is available here; the full text of the Final Rule is available here.  It is scheduled to be published in the Federal Register on November 21, 2018.