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Weekly line: Is CMS really reversing on its site-of-care shift? We're skeptical.

By Heather BellAnna YakovenkoColin Gelbaugh

September 8, 2021

    CMS set the provider world abuzz when it announced its intention to keep the Medicare Inpatient Only (IPO) list in place and remove hundreds of newly added procedures from the Ambulatory Surgical Center (ASC) covered procedures list, reversing two prominent policies finalized just last year.

    Those policies were touted by many analysts (including us at Advisory Board) as clear evidence of CMS' commitment to lower Medicare spending via site neutrality and the transition from more costly inpatient settings to lower-cost outpatient settings. So naturally, CMS' about-face on the policies forced us to pause and reconsider CMS' strategy.

    After carefully reading the 863-page outpatient and ASC payment rule and re-visiting CMS' past approach to site-of-care shifts, we ultimately concluded that CMS' policy reversal does not suggest a reversal on the long-standing transition from inpatient to outpatient settings. Below, we round up the four reasons why we believe CMS will continue to advance down this road, albeit at a more measured pace than it laid out in 2020.

    1. The shift is already underway in the commercial settings

    Using Optum's de-identified Clinformatics® Data Mart Database, we analyzed 2019 commercial and Medicare Advantage claims and found that 9% of total CPT volumes included on the CY 2022 IPO list were performed in the outpatient setting. We also found that 71% of CPT codes on the IPO list had volume recorded in the outpatient setting. When we adjusted the list to include only CPT codes with volumes of over 50, that number increased to 96%. This means the majority of procedure codes on the IPO list have at least some volumes in the outpatient setting, although those volumes are small.

    This data set has several limitations: the data is coming from only one commercial payer, the sample includes patients across all age groups, and the data may have a different complexity profile compared to the traditional Medicare program. However, this analysis does give us an indication that many of these procedures are already being performed on an outpatient basis and could continue to shift as technology and medicine advances.

    This is important because CMS in the rule proposed is going back to its previous method for determining which procedures should be removed from the IPO list. As part of that method, CMS required evidence that the procedure is already being furnished in outpatient settings. Given that the data show some procedures on the IPO list are already being furnished in outpatient settings, CMS may be more inclined to take a closer look at those procedures and determine if it is safe and beneficial to the Medicare population to remove them from the IPO list in the future.

    (Editor's note: Advisory Board is a subsidiary of Optum. All Advisory Board research, expert perspectives, and recommendations remain independent. Optum did not participate in selecting the topic for this post or in the analysis presented in this post.)

    2. CMS wants to continue the IPO list elimination conversation

    While CMS proposed to reverse its 2020 policy to eliminate the IPO list, the agency did not close the door on the conversation. The agency is, at least for now, keeping the conversation going, including soliciting requests for comment on the impact of the potential future elimination of the IPO list and appropriate timelines for doing so. In addition, CMS asked stakeholders to share alternative approaches to evaluating procedure codes on the IPO list to better account for advances in technology and surgical techniques.

    While CMS could decide, based on the feedback it receives, that there is no immediate path to fully eliminating the IPO list, the requests for comment make clear that the agency is re-evaluating the future of the list and the agency's existing methodology for removing procedures. Afterall, part of the reason CMS in 2020 decided to eliminate the list was in response to concerns that the list presented unnecessary barriers and additional work for providers who could determine which setting is most appropriate for their patients.

    3. CMS eyes future quality measures on site-of-care shift

    One big indicator of priority areas for CMS is the Hospital Outpatient Quality Reporting Program. This is a mandatory reporting program that providers must comply with to avoid financial penalties. We have often seen CMS propose quality measures for top priorities for different administrations (take this year's proposed health care personnel Covid-19 vaccination measure).

    CMS made clear that it may factor the quality of procedures shifting from inpatient to outpatient settings into the Hospital OQR Program—thus tying site-of-care shift performance to real dollars. The agency provided few details on this idea, but it invited industry stakeholders to weigh in on the future potential adoption of measures that would assess the quality of care in hospital outpatient settings, with a particular focus on procedures that have shifted from inpatient to outpatient.

    4. CMS states its commitment to site-of-care shift

    Throughout the proposed rule, CMS acknowledges the changes in medicine and technology that are already driving site-of-care shifts and reiterates its commitment to site neutrality.

    As the rule notes, "CMS still believes that as medical practice continues to develop, the difference between the need for inpatient care and the appropriateness of outpatient care has become less distinct for many services."

    As such, the agency on several occasions reaffirms its intent to continue examining procedures on both the IPO and ASC lists. CMS plans to do so based on existing clinical evidence and to ensure all changes meet the agency's long-standing safety criteria and benefits the entire Medicare population.

    IPO list procedures to watch

    If CMS intends to continue its long-standing approach of evaluating a small set of IPO codes each year, the natural question becomes what procedures are likely to come off the list in the near future.

    To answer that question, we looked at fee-for-service Medicare claims for 2019 and at all the procedures that will be back on the IPO list come 2022. We then isolated those encounters that have the highest likelihood to shift because they exhibited two factors:

    • Uncomplicated cases, those claims without a complication or comorbidity (CC) or a major complication or comorbidity (MCC)
    • Short-stay, where length of stay was two days or less

    Based on that analysis, we found the top five procedures to watch are joint replacements, spinal fusion, cardiac cath, arterial disease, and cardiac EP.

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