Includes proposed changes to the OPPS and ASC payment rates and Stark Law exemptions.

On August 4, 2020, CMS posted for inspection the Proposed Outpatient Prospective Payment System (“OPPS”) Rule for 2021.  The proposed rule is scheduled for publication in the Federal Register on Wednesday, August 12, 2020 and would revise the Medicare hospital OPPS and the Medicare Ambulatory Surgical Center (“ASC”) payment systems for calendar year (“CY”) 2021.  The proposed rule would also update the requirements for the Hospital Outpatient Quality Reporting (“OQR”) and the ASC Quality Reporting (“ASCQR”) programs.  In addition, the proposed rule would establish the overall Hospital Quality Star Rating beginning with CY 2021, remove certain restrictions on the expansion of physician-owned hospitals that qualify as “high Medicaid facilities,” and clarify that certain beds are included in a hospital’s baseline number of operating rooms, procedure rooms, and beds.  Comments to this proposed rule must be received by CMS no later than 5 p.m. on October 5, 2020.

OPPS Payment Rates:

The proposed rule would increase the payment rates under the OPPS by an OPD fee schedule increase factor of 2.6%, based on the proposed inpatient market basket increase of 3% under the inpatient payment schedule minus the multifactor productivity (“MFP”) adjustment required by the Affordable Care Act of .4%.  The proposed rule would continue to implement the statutory 2% reduction in payments for hospitals failing to meet the hospital OQR requirements.

Inpatient Only List:

The proposed rule would implement changes to the inpatient only (“IPO”) list for CY 2021.  CMS intends to eliminate the IPO list over the course of 3 years beginning with the removal of approximately 300 musculoskeletal-related services.  CMS is seeking comment specifically regarding the proposed 3-year timeline, additional services for deletion in 2021 and the sequences with which to remove services in the future.

Device Pass-Through Payments:

Devices that are eligible for pass-through payment under the OPPS are separately paid under the ASC payment system and are contractor-priced.  In the proposed rule, CMS discusses five specific applications for device pass-through payments, two of which have received preliminary approval under the fast-track application system.  CMS is soliciting comments on these devices and a final decision on all five devices will appear in the final rule.

Continued Additional Payments to Cancer Hospitals:

CMS proposes to continue providing additional payments to cancer hospitals so that a cancer hospital’s payment to cost ratio (“PCR”) is equal to the weighted average PCR for other OPPS hospitals.  The 21st Century Cures Act, however, requires that the weighted average PCR be reduced by 1%.  Accordingly, CMS proposes a target PCR of .89 would be used to determine the CY 2021 cancer hospital payment.  In other words, the payment adjustments will be the additional payments needed to result in a PCR equal to .89 for each cancer hospital.

ASC Payment Rates and Additional Procedures:

For CY 2019 through 2023, CMS adopted a policy to update the ASC payment system using the hospital market basket updates.  Accordingly for CY 2021, CMS proposes to increase the payment under the ASC payment system by 2.6% for ASCs that meet ASCQR requirements.  The proposed rule would also add eleven procedures to the ASC covered procedures list, including total hip arthroplasty.

Quality Reporting:

The proposed rule would revise and codify certain administrative procedures, and create and expanded review and corrective process.  According to CMS, the proposed rule would not add or remove any quality measures.  Among other measures, the proposed rule would codify the policy requiring that Hospitals sharing the same CMS Certification Number must combine data collection and submission across their multiple campuses for all clinical measures for public reporting purposes.  The proposed rule would also codify certain, previously finalized, quality data validation policies.

Overall Hospital Star Rating:

CMS proposes a methodology to calculate the Overall Hospital Star Rating, utilizing data collected on hospital inpatient and outpatient measures that are publicly reported on a CMS website including data from the Hospital OCR Program.  CMS is also proposing to include Veterans’ Health Administration Hospitals and Critical Access Hospitals in the Overall Hospital Star Rating.  The Overall Hospital Star rating is proposed to be codified at 42 C.F.R. § 412.190.

Physician-Owned Hospitals:

The proposed rule includes two proposals related to physician-owned hospitals and the rural providers and “whole hospital” exceptions to Section 1877 of the Social Security Act, also known as the prohibition on physician self-referral or the Stark Law.

  1. The removal of unnecessary regulatory restrictions on high-Medicaid facilities:

Certain types of physician ownership, including rural providers or “whole hospital” ownership are exempt from the Stark Law’s prohibitions, provided that certain conditions are met.  Absent an exception, which may be requested only once every two years, hospitals utilizing these exemptions may not increase the number of operating rooms, procedure rooms, and beds beyond that for which the hospital was licensed on March 23, 2010.  The proposed rule would revise section 42 C.F.R. § 411.362(c)(1) to permit “high-Medicaid” facilities to request an exception to the prohibition on expansion of facility capacity more frequently than once every two years.  A “high-Medicaid” facility, under the proposed rule, could request an exception to the prohibition on expansion of facility capacity at any time, provided that the “high-Medicaid” facility has not already submitted another request for exception on which CMS has not yet issued a decision.

  1. Including beds in a physician-owned hospital’s baseline consistent with state law:

As noted above, to qualify for the rural provider or “whole hospital” exemption to the Stark Law’s prohibitions, a hospital may not increase capacity beyond that for which the hospital was licensed on March 23, 2010 (with certain exceptions).  The statute and regulations refer to this number as the hospital’s “baseline” number of operating rooms, procedure rooms, and beds.  CMS states that in interpreting and applying the physician self-referral law, CMS defers to state law with respect to whether a bed is licensed at a certain date.   Accordingly, CMS proposes to revise the definition of “baseline number of operating rooms, procedure rooms, and beds,” at 42 C.F.R. § 411.362(a) to include the following language: “For purposes of determining the number of beds in a hospital’s baseline number of operating rooms, procedure rooms, and beds, a bed is included if the bed is considered licensed for purposes of State licensure, regardless of the specific number of beds identified on the physical license issued to the hospital by the State.”  In other words, CMS will consider a bed to be “licensed” if it is within the hospital’s State-approved “bed complement.”

The inspection copy of the proposed rule is posted on the Federal Register website and is available at:

Meeting: Advisory Panel on Hospital Outpatient Payment

On August 10, 2020, CMS published a meeting notice announcing a virtual meeting of the Advisory Panel on Hospital Outpatient Payment for 2020 (the “Panel”).  Advice provided by the Panel is considered by CMS when preparing updates to the OPPS.

The virtual meeting is scheduled for Monday, August 31, 2020 from 9:30 a.m. to 5 p.m. EDT.  Presentations and comment letters must be received by 5 pm on Friday, August 14, 2020 to be considered at the meeting.

More information on comment submission and registration, as well as the meeting agenda, is available in the Federal Register notice, available at: