Medicare’s Hospital Outpatient Prospective Payment System Proposed Rule: Big Changes For 2019

JULY 27, 2018  On Wednesday, the Centers for Medicare and Medicaid Services (CMS) released the calendar year (CY) 2019 hospital outpatient prospective payment system (OPPS) proposed rule addressing payments to hospital outpatient departments and ambulatory surgery centers (ASCs).

In the proposed rule, CMS made several significant proposals, including to expand a controversial policy that pays off-campus hospital departments at the same rate as physician clinics and to extend cuts for 340B-related drugs to such sites as well. Several proposals address the opioid epidemic, including un-packaging non-opioid pain medications in ASC surgical payments. CMS also requested input, while not formally proposing, a renewed Competitive Acquisition Program (CAP)-type model for purchasing Part B drugs through the Center for Medicare and Medicaid Innovation (CMMI).

Comments on the proposed rule are due by September 24 with a final rule expected by around November 1. 

Payment Rates

Overall, CMS estimates that outpatient hospital payments would decrease by a net of 0.1 percent ($80 million nationwide) relative to 2018 rates, which reflects a general market basket-based increase, then decreased by several adjustments, including for productivity, the off-campus policy described above, and a cut mandated by Congress.

Major teaching hospitals take the brunt of the hit, seeing an average decrease of 0.8 percent, while all other hospitals, on average, would see a 0.5% increase to payments.

For ASCs, citing comments received during the 2017 rulemaking cycle, CMS proposes to update rates based on the hospital market basket index instead of the consumer price index-urban (CPI-U) as it ordinarily does.

CMS estimates that ASC payments would increase by $32 million in CY 2019 compared to if they were based on the CPI-U approach. With all factors considered, ASC rates would increase by 2.0 percent in 2019, reflecting a 2.8 percent projected hospital market basket minus a 0.8 percent multi-factor productivity adjustment.

Expansion Of Site Neutrality For Outpatient Services

Section 603 of the Bipartisan Budget Act of 2015 (BBA) reduced payments to off-campus provider-based hospital departments to the amount paid to physician clinics for the same service, effective January 1, 2017. The BBA excepted certain sites from these payment reductions, namely those already billing under the hospital outpatient rate as of the date of enactment of the BBA (i.e., existing sites were grandfathered) and emergency services furnished by off-campus emergency departments.

In the proposed rule, CMS aims to extend this site neutrality policy beyond what is required by the BBA. It would cut payments to currently grandfathered sites for certain clinic visit services, citing concerns about the existing trend where more services are shifting away from doctor offices and into hospital outpatient departments. The proposal is not budget neutral, which is why it contributes to the net overall reduction in hospital payments that would be effectuated under the rule. According to the agency, about a fifth of the gross $760 million in savings from the proposal would accrue to patients in the form of reduced cost-sharing.

Further, CMS proposes to apply the site neutral payment policy to new lines of service added to previously st sharing exempted/grandfathered outpatient departments, positing that Congress would not have intended to allow such new families of service to be exempted from the BBA policy. The agency also notes that observed growth in new service lines at these outpatient facilities may have been an unintended consequence of the initial policy that it believes is best halted. 

New 340B-Related Cuts

Last year, CMS finalized a policy to pay covered outpatient drugs and biologicals acquired by hospitals under the 340B Program at a rate of average sales price (ASP) minus 22.5 percent, rather than ASP plus 6 percent that is typical under the payment system. This cut did not initially apply to off-campus hospital departments subject to the site neutrality policy described above, because the agency essentially now treats those sites like physician clinics.

 Here, CMS is now reversing that policy and would extend these cuts for 340B drugs to off-campus departments already facing payment cuts under the site neutrality policy. The agency would continue to exempt rural sole community hospitals, children’s hospitals, and certain cancer hospitals.

Opioid-Related Policies 

CMS proposes modifications to patient experience measures included in the hospital quality reporting program to remove three pain communication-related metrics. The change stems in part from concerns that providers may feel unduly pressured by patients seeking opioid-based therapies who can, in turn, report the physician neglected their preferences.

Further, citing the President’s Opioid Commission work, the agency adds new separate payment for non-opioid pain medications that otherwise function as a supply under the ASC payment system. It cites reports showing a 70 percent decline in such products after they lose pass-through status. CMS notes it is not applying the same change to hospital outpatient departments, suggesting that there is less evidence of behavioral change when pass-through status is removed in that setting.

RFI On Using Authority For Part B Competitive Acquisition Program Through CMMI

As signaled in the Administrations’ drug pricing Blueprint, CMS seeks comment on “key design considerations” for testing a CAP-like model through CMMI, citing comments submitted in response to a Request for Information (RFI) that accompanied the document.   

Specific questions are posed in four categories: 1) included providers and suppliers; 2) included drugs and biologicals; 3) beneficiary cost-sharing, 4) protections and fiscal considerations; 5) model vendors; 6) regulatory barriers and transparency issues; 7) manufacturer participation; and 8) model scope.

Initially established under the Medicare Modernization Act, the CAP program ultimately languished due to lack of provider or vendor participation. A pagereflecting the operation of the program is still available on CMS’s website.

Relatedly, CMS also seeks comment on how to promote interoperable electronic data exchange across providers and adds a new RFI on price transparency, including making charge information publicly available. 

There are several other policies in the proposed rule that I won’t address here but can be skimmed on the helpful fact sheet accompanying the release. Happy reg spelunking.