CMS has issued its proposed rule to update Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System rates and policies for calendar year (CY) 2019.  In addition to providing routine annual updates, the proposed rule includes several provisions intended to encourage “site-neutral payments” for different types of providers.  CMS also proposes a change to the basis for updating ASC rates that has long been sought by stakeholders.  CMS will accept comments on the proposed rule until September 24, 2018.

Hospital Outpatient Provisions

CMS proposes a 1.25% update to Medicare OPPS rates for 2019, reflecting an expected 2.8% market basket increase that is partly offset by both a statutory 0.75 percentage point reduction and a 0.8% multi-factor productivity (MFP) reduction.  The update for hospitals that fail to meet quality reporting requirements is reduced by 2.0% points.  Payment changes for individual procedures vary.

In the proposed rule, CMS emphasizes its interest in addressing payment differentials that the agency believes drives site-of-service decisions, especially between the physician’s office and hospital outpatient department settings, and increases costs to the Medicare program and beneficiaries.  In particular, CMS targets certain off-campus hospital provider-based departments (PBD) that are “excepted” under section 603 of the Bipartisan Budget Act of 2015.  Section 603 provides that effective for services provided on or after January 1, 2017, certain off-campus PBDs are generally paid under the physician fee schedule (PFS), rather than the typically higher-paying OPPS, unless an exception applies.  For 2019, CMS proposes:

  • Paying a PFS equivalent rate for clinic visit services (G0463, Hospital outpatient clinic visit for assessment and management of a patient) when provided at an “excepted” PBD. CMS observes that clinic visits are the most common service billed under the OPPS, and this policy is expected to save approximately $760 million in FY 2019, including $150 million in reduced beneficiary copayments.
  • CMS proposes to apply to exempted PBDs a current policy that reduces OPPS payment for separately payable, nonpass-through drugs and biologicals (other than vaccines) purchased through the 340B drug discount program from average sales price (ASP) plus 6% to ASP minus 22.5% (with certain exceptions).
  • Revising payment when an excepted PBD expands into new lines of service. Under the proposed rule, if an excepted off-campus PBD furnishes a service from one of 19 proposed clinical families of services that it did not furnish during a baseline period (November 1, 2014 through November 1, 2015), the service from the “new” family would be paid under the PFS rather than the OPPS.
  • CMS notes that it is “developing a method to systematically control for unnecessary increases in the volume of other hospital outpatient department services.” In the meantime, CMS requests comments on alternative approaches to controlling unnecessary volume increases, while “not impeding development or beneficiary access to new innovations.”

Other proposed provisions include the following:  

  • CMS proposes several modifications to the device-intensive procedure criteria, including lowering the device offset percentage threshold from 40% to 30%, and extending device-intensive status to certain devices that do not remain in the patient’s body after the conclusion of the procedure
  • CMS proposes to use a 3% wholesale acquisition cost (WAC) add-on, rather than a 6% add-on, whenever WAC-based pricing is used for a drug or biological (such as for separately payable OPPS drugs and biologicals for which ASP data is not available).
  • CMS seeks comments on a potential Innovation Center value-based model that would build upon the Medicare Part B drug Competitive Acquisition Program (CAP), which was in effect July 2006 through December 2008. This model would allow health care providers to acquire separately-payable Part B drugs through value-based agreements with manufacturers administered by CAP-like model vendors.
  • CMS proposes to create three new comprehensive APCs (C-APCs), for Level 3 ENT Procedures and Level 3 and 4 Vascular Procedures. CMS also proposes to exclude from the C-APC packaging policy payment for procedures assigned to New Technology APCs.
  • The proposed rule would maintain the high cost/low cost threshold policy for packaged skin substitutes for 2019, but the agency solicits comments on several reform options for future years that are intended to provide payment stability for these products.
  • CMS again proposes to increase the threshold for separate payment for outpatient drugs to cost-per-day that exceeds $125, up from the current threshold of $120.
  • CMS invites comments on seven applications for device pass-through payment status.
  • CMS requests comments on way to improve charge/price transparency and methods to promote interoperability and electronic health care information exchange (as CMS has done in other proposed Medicare payment rate rules this year).
  • The proposed rule addresses numerous other policies, including: changes to Hospital Outpatient Quality Reporting Program measures; and payment rates for partial hospitalization program services furnished in hospital outpatient departments and community mental health centers.

ASC Provisions

CMS proposes to increase ASC rates by 2.0% for ASCs that meet ASC Quality Reporting (ASCQR) Program requirements. In a significant change, CMS is proposing to base its ASC update on the hospital market basket update – not the Consumer Price Index for All Urban Consumers (CPI-U).  Specifically, the proposed update reflects a hospital market basket percentage increase of 2.8% minus a proposed 0.8 percentage point productivity adjustment.  CMS estimates that using the CPI-U would have resulted in only a 1.3% update.  According to CMS use of an alternative update factor (i.e., hospital market basket) “could stabilize the differential between the OPPS payment and the ASC payment, to the extent that the CPI–U has been lower than the hospital market basket, and encourage the migration of services to lower cost settings as clinically appropriate.”  CMS proposes to use the hospital market basket update for an interim period of 5 years while the agency assesses whether that is an appropriate proxy for ASC costs.

CMS proposes revisions to the list of ASC covered surgical procedures, along with a proposal to review all 38 procedures added to the ASC covered procedure list over the last three years.  CMS also proposes updates to the ASCQR Program; changes to the criteria for ASC device-intensive procedures; and unpackaging the cost of non-opioid pain management drugs that function as surgical supplies, among other ASC policy changes.