CMS has published its final rule with comment period updating the Medicare Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgical Center (ASC) Payment System rates and policies for CY 2017.  CMS will accept comments on a limited number of provisions until December 31, 2016.

Major provisions impacting outpatient hospital department services include the following: 

  • The final rule adopts a 1.65 percent OPPS update, reflecting a 2.7 percent market basket increase, which is partly offset by a -0.3 percent multifactor productivity (MFP) adjustment and an additional 0.75 percent reduction (both mandated by the Affordable Care Act).  The impact of the rule on specific procedures varies, and the update for hospitals that do not meet Hospital Outpatient Quality Reporting (OQR) Program reporting requirements is reduced by 2.0 percentage points.  CMS expects that overall OPPS payments will increase by 1.7 percent compared with 2016 levels as a result of the final rule.
  • CMS adopted – with significant changes – its proposal to implement Section 603 of the Bipartisan Budget Act of 2015, which establishes a site-neutral payment policy for certain newly-acquired, provider-based, off-campus hospital outpatient departments (which CMS calls “off-campus provider-based departments” or “off-campus PBDs”).  Effective for services provided on or after January 1, 2017, off-campus PBDs will be paid under the Medicare physician fee schedule (MPFS) in most cases, rather than the generally higher-paying OPPS.  Consistent with the statutory provision, CMS will provide for certain exceptions to its off-campus PBD policy, including grandfathering rules for off-campus PBDs that were billing under the OPPS for services furnished prior to November 2, 2015.  While CMS proposed restricting grandfathered off-campus PBDs from relocating and still qualifying for OPPS payments, the final rule includes an exception for relocations in extraordinary circumstances such as natural disasters. Furthermore, CMS did not finalize its policy to bar excepted off-campus PBDs from expanding clinical service lines by off-campus PBDs, but the agency could revisit this issue in the future. CMS also will allow an off-campus PBD to maintain its excepted status if the hospital has a change of ownership and the new owners accept the prior owner’s Medicare provider agreement. In addition, the final rule exempts items and services furnished in a hospital department within 250 yards of a remote location of the hospital; and services furnished by a dedicated emergency department.  With regard to payment, while the proposed rule did not provide for direct billing or payment to non-excepted PBDs for their services, CMS acknowledged the “significant negative consequences” of this proposal. In the final rule, CMS is establishing new MPFS site-of-service payment rates to pay non-excepted off-campus PBDs for the technical component of non-excepted services (generally based on OPPS payments scaled downward by 50 percent). As for billing, CMS will allow hospitals to bill for non-excepted on the institutional claim form with the “PN” claims processing modifier. CMS is seeking comments on the new payment mechanisms, and CMS could make adjustments through rulemaking effective in CY 2017.
  • CMS adopted its proposal to apply its conditional packaging policy at the claim level instead of based on the date of service.  CMS expects this change will increase conditional packaging, since packaging will occur whenever a conditionally packaged item or service is reported on the same claim as a primary service, regardless of the date of service.  CMS also finalized revisions to packaging policies applicable to laboratory tests.
  • CMS finalized its proposal to assign device-intensive status to all procedures that require the implantation of a device and that have an individual HCPCS code-level device offset of greater than 40 percent, regardless of the ambulatory payment classifications (APC) assignment.  That is, CMS will look to the HCPCS/CPT level rather than calculate the device offset at the APC level.  CMS also adopted its proposal to base payment for very low-volume device-intensive APCs (fewer than 100 total claims) on the median cost, rather than on the geometric mean, which is intended to mitigate sharp payment fluctuations for such procedures.
  • CMS added 25 new comprehensive APCs (C-APCs), for a total of 62 C-APCs in 2017.
  • CMS increased the 2017 threshold for separate payment for outpatient drugs to cost-per-day that exceeds $110, up from $100 in 2016.
  • CMS adopted its proposal to require hospitals to use a modifier on claims for X-rays that are taken using film; use of the modifier would result in a 20 percent payment reduction for the X-ray service.
  • CMS is removing seven procedures from the inpatient only (IPO) list for 2017, including five spine procedures as well as two laryngoplasty procedures. In addition, CMS discussed comments it received regarding whether total knee arthroplasty procedures should be removed from the IPO list (the overwhelming majority supported such removal), but CMS did not propose making such a change at this time.
  • CMS adopted its proposal to expire pass-through status for devices, drugs and biologicals on a quarterly, rather than annual, basis, which will allow CMS to provide a pass-through period that is as close to a full 3 years as possible. CMS also finalized its proposal to consider pass-through device payment status to begin on the first date on which payment is made rather than the date on which CMS establishes the category.
  • CMS adopted various changes to hospital quality/value programs, including the adoption of new Hospital Outpatient Quality Reporting Program measures and removal of the pain management dimension from the Hospital Value-Based Purchasing program.

With regard to ASCs, the 2017 update is 1.9 percent, reflecting a 2.2 percent inflation update, offset by a -0.3 percent MFP adjustment.  ASCs that do not meet quality reporting requirements are subject to a 2 percent payment reduction. The final rule includes modifications to the Ambulatory Surgical Center Quality Reporting (ASCQR) Program measures and finalizes a CMS plan to publicly display on a CMS website ASC quality data beginning with the CY 2018 payment determination.